A tsunami of challenges has been unleashed on the small business owners who base their plans around tourists. We examine their untold trials.
Let it not be forgotten that the last two years have been some of the most challenging times that many small businesses will ever face. Let it not be forgotten that of those small businesses, the companies which have specialized in tourism and entertainment have often been hit the hardest. While it may have been destination restaurants or Route 66 oddity museums or small scenic sites, they all faced a battle unlike anything they had ever seen before. Many went under. For those that survived, the hope was that a roaring economy would welcome them back. And though major tourist enterprises like Walt Disney World, Dollywood, Las Vegas, etc, have all done incredibly well, the little guys and gals out there have not had the same experience.
According to the Nation’s Restaurant News, more than 10% of all restaurants in the United States were closed permanently due to COVID by the summer of 2021. That’s not taking into account the additions that arose since that point. Maintaining a restaurant is already one of the hardest jobs in the world. That additional 10% drop accounts for an almost unfathomable number of dining establishments that were the dreams of untold entrepreneurs, now wiped out by a pandemic.
More than 10% of restaurants in the United States have closed permanently since the coronavirus pandemic began last March, foodservice research firm Datassential said Monday.
According to Firefly, Datassential’s proprietary database, 79,438 restaurants in the United States have closed, which is 10.2% of the total of 778,807 restaurants that were in operation at the outset of the public health crises. That includes full-service and limited-service restaurants as well as food trucks.
— Bret Thron, Nation’s Restaurant News
But the economy that restaurants and tourist destinations are facing is not one that welcomes an easy transition. Instead, we have had two straight quarters of contracted GDP — a recession in any other time. Now, leaving politics aside, it looks like taxes are going up even as inflation still sits at records for the last four decades.
The non-partisan Tax Foundation has found that the Senate bill called the “Inflation Reduction Act” is anything but what its name implies. Again, let’s leave the politics out of all of it and stick with just the facts (i.e. we’re not going to debate in this article whether higher taxes are good nor bad). With little in the way of bipartisan support for the bill, we’ll stick with just its first two years of impact since it is unlikely to remain in place any longer than that duration.
Inflation is driven by expectations regarding the likelihood that the federal government will be able to repay its debt over the long term, which is a function of the expected performance of the economy, tax collections, and spending. By reducing long-run economic growth, the bill worsens inflation by constraining the productive capacity of the economy.
To the extent the revenue raisers are seen as long-lasting sources of revenue, the bill reduces inflation, but projected revenues are not certain and may be less than we are forecasting. For example, the history of the corporate alternative minimum tax indicates the book minimum tax may be a diminishing source of revenue. By increasing spending, the bill worsens inflation, especially in the first two years, as revenue raisers take time to ramp up and the deficit increases. We find that budget deficits would increase from 2023 to 2025, potentially worsening inflation.
To the extent the tax credits and health-care subsidies are expected to be extended on a permanent basis, these policies put upward pressure on inflation.
— Details & Analysis of the Senate Inflation Reduction Act Tax Provisions (Click Link for Authors)
What this means is that for businesses that are especially struggling (see restaurants, lodging, smaller tourism companies), they now face two years of higher taxation, the possibility of increased IRS audits, as well as continued inflationary pressures. It could be a very difficult time for small businesses working on the funding of fun.
In totality, perhaps the SIRA is a positive for the country. Perhaps it is not. That’s beyond my purview. What I do know is that in terms of small businesses in the tourism industry, it makes for a more challenging two years. So, in essence, when you stop by your favorite getaway diner near the coast, or you stay in that mom and pop bed and breakfast, make sure to be a little extra kind. If you have the money, drop a bigger tip. Many of us have had to tighten our belts significantly in the past year-or-so, and it looks like those trying to give you a vacation experience are going through that at an even greater scale. We found previously that 82% of Americans downsized their vacation plans for this past summer — that’s not just impacting those who wanted to get way. It’s also hurting those who were waiting on us to arrive and keep them afloat.
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