Travel Taxes are Inhospitable, Significant

July 26, 2011

Before planning that next family vacation, travelers have another factor to consider – the taxman. Recently the Global Business Travel Association released a report ranking the top 50 destinations in the United States according to their travel taxes, as well as overall tax burden.

Travel taxes such as hotel, meal, and car rental taxes disproportionately affect visitors. We view travel taxes as a tool legislators use to raise revenues from nonvoting nonresidents who have little means for redress.

These taxes are nothing to scoff at. According to GBTA, they represent a 56% increase over existing general sales taxes and vary by as much as 80% between the highest and lowest taxed destinations.

Their report finds:

The U.S. cities with the lowest discriminatory travel tax rates in central city locations are:

1. Orange County, CA

2. San Diego, CA

3. San Jose, CA

4. Burbank, CA

5. Ontario, CA

The cities that impose the highest discriminatory travel taxes on travelers are:

1. Portland, OR

2. Boston, MA

3. Minneapolis, MN

4. New York, NY

5. Chicago, IL

When considering the overall tax rates, including travel taxes, the story changes a little:

The research shows the U.S. cities where travelers incur the lowest total tax burden in central city locations, factoring in general sales taxes and discriminatory travel taxes, are:

1. Fort Lauderdale, FL

2. Fort Myers, FL

3. West Palm Beach, FL

4. Detroit, MI

5. Portland, OR

The cities that impose the highest total taxes on travelers are:

1. Chicago, IL

2. New York, NY

3. Seattle, WA

4. Boston, MA

5. Kansas City, MO.

These figures are revealing. California may be friendly to visitors, but that doesn’t mean it is out of the woods. In 2011, California ranked 49th out of 50th in our State Business Tax Climate Index.

While this represents an excellent opportunity for reform, Californians can take some solace. At least they are not New York, which in addition to having high travel taxes ranks dead last in our index. Earlier this year, New York further expanded its travel taxes to include online travel agencies.

On the other hand, Florida, which claims the top three cities, scores well on our index. Florida comes in 5th place, behind South Dakota, Alaska, Wyoming, and Nevada.

For more information on travel taxes, check out our blogs posts here, here, and here.

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