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USA Today on Tourism Taxes

1 min readBy: Joseph Bishop-Henchman

USA Today has a great piece by Dennis Cauchon reviewing some of the increases in state tourism taxes this year:

Taxes on travel are soaring as states and cities target the wallets of tourists and business travelers for new revenue.

Hotel taxes, car rental fees and other charges were jacked up in many states in an effort to balance budgets by last week, when the fiscal year started in 46 states.

Popular tourist destinations were hit especially hard. Among places where taxes rose:

  • Hawaii. The hotel room taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increased from 7.25% to 8.25% on Wednesday and will rise to 9.25% in July 2010.
  • Nevada. The room tax will increase up to 3 percentage points, to a maximum of 12%. In Las Vegas, the hotel tax jumps from 9% to 12%. Reno’s tax was already 12% and is not scheduled to change.
  • New Hampshire. The tax on rooms and restaurant meals rose from 8% to 9% and was extended to include recreational vehicles at campgrounds.
  • Massachusetts. Cities were given authority to raise the hotel tax from 4% to 6%, in addition to the state tax of 5.7%. Taxes on eating out will rise from 5% to 6.25% statewide, plus another 0.75% if cities choose.
  • New York City. The city, which raised its hotel tax March 1 to 14.25%, not counting other fees, will start charging more for Internet reservations.

Tourism-related business (rental car companies, hotels, etc.) has been fighting against a national trend to foist new taxes on non-residents who have no political power within the state. From a policy perspective, this gouging of non-residents is the wrong approach to taxation. States should focus on enacting simple broad-based taxes without favoring one type of purchase or purchaser over another. Indeed, if every state taxes hotel rooms in a competitive fashion, then a race to higher rates is going on, with each state taxing other states’ residents.