NCPA - National Center for Policy Analysis


July 7, 2009

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, says USA Today.

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

  • Hawaii -- the hotel room tax increased from 7.25 percent to 8.25 percent on Wednesday and will rise to 9.25 percent in July 2010.
  • Nevada -- the room tax will increase up to 3 percentage points, to a maximum of 12 percent; in Las Vegas, the hotel tax jumps from 9 percent to 12 percent; Reno's tax was already 12 percent and is not scheduled to change.
  • New Hampshire -- the tax on rooms and restaurant meals rose from 8 percent to 9 percent and was extended to include recreational vehicles at campgrounds.
  • Massachusetts -- cities were given authority to raise the hotel tax from 4 percent to 6 percent, in addition to the state tax of 5.7 percent; taxes on eating out will rise from 5 percent to 6.25 percent statewide, plus another 0.75 percent if cities choose.
  • New York City -- the city, which raised its hotel tax March 1 to 14.25 percent, not counting other fees, will start charging more for Internet reservations.

"You couldn't pick a worse time to make it more expensive to rent a hotel room," says Mark Woodworth, executive vice president of PKF Hospitality Research in Atlanta.  Hotel occupancy this year will be at its lowest level -- 55.5 percent -- since his company started keeping track in 1936, Woodworth says.

Legislators say tax hikes were needed.  New Hampshire, which doesn't have a sales or income tax, made painful spending cuts in addition to hiking taxes and fees, says USA Today.

Room taxes generated $14 billion in 2008, the American Hotel & Lodging Association reports.  That amount is expected to fall in 2009, even with higher tax rates.

Car rental fees are rising too, says USA Today.  A new 5 percent tax at the Newark airport will fund economic development.   Wisconsin approved hiking the car rental fee in Milwaukee from $2 to $18 to subsidize mass transit.

Source: Dennis Cauchon, "Tourists Pay Price as States Jack Up Taxes to Balance Budgets," USA Today, July 5, 2009.

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