SAN FRANCISCO — California’s fiscal cliff, with its proposed cuts to taxes and spending, will force hotels to start thinking about their business models in a much more challenging time than they have in years.
The state is facing a $1.6 trillion budget deficit, and is considering more than $200 billion in new taxes and fees that hotel owners will be forced to pay as a result.
That would be a boon for some, who are already struggling with the recession and are seeking to shore up their bottom lines.
But for others, including hotels, the state’s tax cuts would be disastrous for their bottom line, hurting them more than the recession would.
The tax cuts have been the keystone of California’s recovery, helping the state grow its economy and offset a $8.7 billion loss in state revenue.
It also saved the state from the financial meltdown of the 1990s, when it had to lay off tens of thousands of workers.
The California State Legislative Analyst’s Office released a new report Tuesday estimating that the state would lose $6.5 billion in state income tax revenue if the tax cuts were eliminated.
That is equivalent to more than a third of the state budget, the office said.
The forecast is based on a new estimate of the tax burden for the state, which is due to be released Wednesday.
The state would have to cut spending by $20 billion or more to reach its projections, the report said.
While the state may not be able to meet its revenue targets, hotels are already feeling the impact of the cuts.
The economy has suffered badly in recent months, and the state has struggled to lure tourists.
In November, the Tourism Bureau reported that the number of people visiting the state fell 3.6 percent from the previous year.
It has also been hit hard by a spike in hotel room occupancy and increased hotel room rates.
Laws that require hotel owners to provide affordable lodging also would be affected, as would laws that require the state to pay for certain expenses such as police and fire protection, health care, parks and recreation, and schools.
But the report notes that the budget shortfall is likely to be smaller because California’s economy is expected to grow at a much faster rate than other parts of the country.
For the first time in more than two decades, the U.S. economy is likely headed for a modest expansion, the California economy is expanding at a moderate pace and the number and size of jobs is projected to increase.
The number of jobs for people 25 to 54 in the state grew 3.2 percent in the first six months of 2017, the highest rate in five years.