Responding to vocal protest from hotel and restaurant owners, the Edgartown selectmen voted this week to drop two articles from the annual town meeting warrant that would have increased the rooms tax and added a meals tax in town.

Allowed under a local option provision in state law, the town was considering increasing the room occupancy tax by two per cent, and imposing a meals tax of .75 per cent.

“It’s a terrible idea,” said Victorian Inn owner Stephen Caliri at a public hearing hosted by selectmen on Tuesday afternoon. Mr. Caliri said with business at its worst in nearly two decades, inns are being forced to close all over town. “When you’re trying to encourage business, increasing taxes is a bad idea,” the inn owner declared.

The state-mandated room occupancy excise tax is 5.7 per cent for each room that costs more than $15 per day; individual towns have the option of increasing the rate by up to six per cent to generate extra revenue. The rooms tax in Edgartown currently stands at 9.7 per cent, after the town voted to approve a four per cent increase at the annual town meeting in April of 1986.

The town does not currently impose a meals tax, but the state recently passed legislation that allows towns to establish a sales tax on restaurant meals at a rate of up to .75 per cent.

Combined, the new taxes would net the town roughly $200,000 in additional revenue per year. But at the public hearing Tuesday, several business owners and managers argued forcefully that costs to the town could be far greater than the profit.

“You’re probably talking about losing 150 beds here,” said Mr. Caliri. He said the town could expect to lose revenue from hotels forced to close when the tax increase began affecting patronage.

“I understand the need for the revenue,” said Harbor View Hotel manager Thad Hyland. But he said the expense of traveling to the Island is already high, and events like weddings and banquets are taxed individually, making the Vineyard that much more expensive as a tourist destination. “It’s hard to separate these items,” he said.

Mr. Hyland also said the recession has put a strain on local business owners, who have seen tourism shrink in the shoulder season with middle income visitors no longer able to afford to come. “We’d like it to be very strongly considered that this might be a tough move, especially in this economy,” he said.

Edgartown Commons manager Rick Bailey said he feared a tax hike would drive business away from Edgartown and into other Island towns. “I think we’re trying to take advantage of our summer guests that come to the town. I think they are going to start to resent it and go to another town, or just not come [to the Vineyard],” he said.

“I never thought I would get caught on this Republican platform,” said former planning board member Alison D. Cannon, who also objected to the proposal. “People aren’t eating out the way they used to and they’re not spending the money that they would. . . It’s heartbreaking to see the empty stores, the empty bed and breakfasts. One thing we do need in this town that makes it so attractive are the inns. I hate to see the town keep sliding toward an empty place in the winter,” she said.

“The reason you’re losing all these businesses is that it’s expensive to run a B and B here. You’re killing us — we’re really caught in a pinch here,” said Mr. Caliri. He said many Cape Cod towns have already voted not to adopt the tax increases, and that Edgartown should follow suit out of respect for its struggling business owners. “When your revenue stream keeps getting shorter and shorter, you keep cutting back. It hurts. There are a lot of expenses that we can’t pass on by raising our rates. It’s very expensive on Martha’s Vineyard . . . but we’ve really kind of maxed out on what we can charge people,” he said.

Selectman Margaret Serpa agreed with the town innkeepers. “I think we all see the effects of what’s happening in town, and it’s not a nice feeling to see that,” she said, adding that the tax increase would only aggravate an existing problem. “It’s already bad enough, especially this time of year,” Mrs. Serpa said.

The vote by the board to remove the articles from the town meeting warrant was met with applause from the people in attendance.

“It certainly sounds like a lot of money . . . [but] I didn’t realize that there was such a negative feeling,” said selectman Arthur Smadbeck.