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Question - The city of Clement levies a 5 percent tax on the base price of rooms provided by hotels and motels located within the city limits. This year, the aggregate room price subject to tax was $15 million, so current-year revenue was $0.75 million. Clement's city council recently voted to increase the hotel tax rate to 6 percent for the next fiscal year.
-Compute next year's hotel tax revenue assuming next year's tax base equals the current year base.
-Compute next year's hotel tax revenue assuming next year's tax base decreases to $12 million.
-Compute next year's hotel tax revenue assuming next year's tax base decreases to $9 million.
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