Anaheim Taxpayers Subsidizing Luxury Hotels

One of the biggest names in entertainment, Disney, just received the biggest tax break in its hometown’s history. The Walt Disney Company is taking advantage of a new policy in Anaheim, California, which allows new luxury hotels to keep 70 percent of their occupancy taxes, known as the Transient Occupancy Tax.

As a part of this new policy, the city of Anaheim is granting an estimated $550 million in tax breaks over the next 20 years, equaling about $27.5 million per year. As a result, under this policy the Disney Company’s new luxury hotel would be able to keep $267 million of the projected $382 million in occupancy taxes that it would generate.

The Los Angeles Times editorial board reports that “Disney has insisted that the hotel would not be built without the incentive. Some skepticism is in order, however,” as “the hotel market is already booming. Some 1,500 new rooms have been built or are under construction in the city.”

Additionally, as the editorial team writes, “When lawmakers adopt tax breaks to encourage hotel construction, or in-state movie production, car manufacturing or any other specific activity, they are essentially picking favorites with public dollars.”

However, the board also notes that public officials often face bad incentives: “Supporters of Anaheim’s tax break argue that the city needs to subsidize luxury hotel construction to remain competitive with other large cities that offer similar incentives.”

This race to the bottom with taxpayer dollars can hamper long-run growth by distorting investment towards both unproductive sectors unworthy of investment and productive ones that can survive on their own without public assistance.

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