NCPA - National Center for Policy Analysis

Taxing Travel

July 15, 2003

Travelers face higher taxes as more state and local governments turn to out-of-towners to ease their budget troubles. In the past two months, cash-strapped states have adopted taxes on lodging, meals or car rentals to raise extra revenue.

  • New Jersey adopted a 7 percent hotel tax and gave cities the right to collect 1 percent more. Gamblers in Atlantic City face a $1 increase for casino parking and a $3 increase for hotel rooms.
  • Alaska will impose a 10 percent tax on car rentals and a 3 percent tax on recreational vehicle rentals, a move expected to make $6 million.
  • Rhode Island adopted a 1 percent tax on restaurant meals.
  • City authorities in Wilmington, Delaware, added a hotel tax of up to 3 percent.
  • New or higher travel taxes are also being considered in Oregon, Philadelphia, San Diego, and Albany, N.Y.

Companies generally spend about 20 percent of their travel budgets on taxes alone, and some businesses are fighting the tax increases. In West Memphis, Ark., for example, the local hospitality association is campaigning to overturn a 1 percent local tax on hotels and restaurant meals, because the revenue garnered from it isn't being used to promote tourism.

Source: Barbara De Lollis, "Needy Local, State Governments Tack More Taxes Onto Travelers," USA Today, July 15, 2003.

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