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An epidemic of new or increased travel taxes-increasingly prompted by governmental budget quagmires--has spurred the travel industry to unite to battle the spread. From research to lobbying, coalitions to strategic plans, a multitude of efforts are underway to curtail the rise in hotel, car rental and meal taxes.
The U.S. Travel Association early next year is expected to announce an advisory board to "make policymakers more discerning and informed of the pros and cons of taxes," according to USTA senior vice president Geoffrey Freeman.
"There's no doubt, based on every bit of evidence, that localities and states are more desperate than ever for every bit of revenue," Freeman said. "Based on anecdotal evidence, it's apparent to us that they're trying more and more to [target] the visitor, or who they think might be the visitor, to fund it."
Taxing bodies--cities, counties and states--often believe that tourism taxes are paid by out-of-town visitors so it is "better to export the tax burden. The reality is quite different," according to the Lodging, Rental Car and Meal Taxes on Travelers in the Top 50 U.S. Cities report issued in August by the National Business Travel Association Foundation and Concur. "Most companies spend the majority of their car rental and hotel budgets in the areas where they have offices or other facilities. Further, more than half of car rentals are from car rental companies' local offices, rather than airport locations, suggesting that the majority of car rental customers are, in fact, local," the report stated.
Taxes, according to the report, also "factor into travel decision making. Cities, states or counties with the highest discriminatory travel taxes are likely losing business and may not even know about it." Meeting site-selection decisions are typically made on the total cost, including all taxes and fees, the report noted.
Industry Consensus Builds
Concern over rising tax trends was so high, Freeman said, that USTA in mid-September "brought in 60 leaders--from destinations, the corporate community, gaming, rental cars--representing just about every major segment in the travel industry. For the first time in many, many years, there was unanimity that the travel industry needs to fight back, to come together as one and get more engaged. That is a big step for this industry because one person's ugly tax is another's source of revenue for a convention center or a marketing program," he added.
USTA plans to "step forward in a bold way on travel taxes and create a standing institute to focus on the role of these taxes, effects of these taxes, expose some of the most egregious taxes and find common ground in the industry." When it was called the Travel Industry Association, the group studied taxes, but eliminated such efforts when it couldn't identify consensus on what to do about taxes, Freeman said.
While stakeholders expressed "immense concern" about the proliferation of local taxes, they also shared "fear about something we haven't seen yet in this country, but we're seeing more and more overseas: the issue of using taxes as a means of punishing travelers and discouraging travel." In the United Kingdom, the chairman of a government committee on climate change suggested that frequent flyers could be taxed more as a means to discourage travel and meet carbon emission standards.
Meanwhile, a newly formed Council on Room Tax Solutions by the International Society of Hotel Association Executives and American Hotel & Lodging Association, created four task forces to develop toolkits by next summer at the latest to help travelers, hotels and hotel associations educate policymakers.
What Tax Rate Is Reasonable?
The council's goals are to make sure that the "room tax doesn't get so high" as to be unreasonable, as well as to "make sure that the taxes are used appropriately," according to council co-chair Trisha Pugal, who also is president and CEO of the Wisconsin Innkeepers Association. AHLA governmental affairs senior vice president Shawn McBurney also co-chairs the council.
"The general purpose of a room tax is to fund tourism promotion so that cost isn't borne by a community. But when it's used for other services," such as city hall maintenance, residential services or to balance general fund budgets, travelers don't benefit, Pugal said.
The Coalition Against Discriminatory Car Rental Excise Taxes has opposed attempts to boost taxes in Colorado, Florida, New Jersey and Wisconsin. USTA this month honored coalition organizer and Enterprise Holdings chairman and CEO Andy Taylor for "challenging excise taxes that single out car rental customers to fund unrelated projects and programs in local communities," according to the coalition.
Taylor opposed Colorado's move to double the car rental excise tax to $4 a day to fund transportation projects, New Jersey's plan to add a 5 percent tax on car rentals to boost local economic development in addition to the special $5-per-day state tax and Wisconsin's new $18 tax on vehicle rentals.
"These discriminatory taxes have drained more than $7.5 billion from the wallets of car rental customers--all to fund special projects and programs all over the country that have nothing to do with travel or renting a car," stated Taylor, whose company owns Alamo Rent A Car, Enterprise Rent-A Car and National Car Rental. The coalition noted that car rental excise taxes have tripled during the past 15 years as more than 100 such taxes are now in place across 43 states and the District of Columbia.
Part of the coalition and USTA efforts, NBTA in August released a report from its foundation, compiled by the American Economics Group, that calculated travel tax costs for the 50 U.S. cities with the most air passengers.
Cities with the highest combined daily travel taxes--lodging, rental cars and meals--were ranked in descending order: Chicago, Seattle, Dallas, San Antonio, Houston, Phoenix, Kansas City (Mo.), Minneapolis, Austin and New York. Cities with the lowest combined daily travel taxes, ranked in ascending order, were: Portland (Ore.) Detroit, Honolulu, Fort Myers (Fla.), Fort Lauderdale, Orange County (Calif.), West Palm Beach (Fla.), Hartford (Conn.), Burbank (Calif.) and Orlando (Fla.).
To compile the study and create an "apples-to-apples" comparison, researchers applied each locale's tax rate to the same average price for each service across the country. For example, the base hotel room rate was $95.61, one-day car rental rate was $73.66 and daily meal cost was $85.80.
While the NBTA report compiled rates as of this year, a number of increases have been approved but are not readily found in a single database. Management.travelsearched newspaper stories across the country to identify the following taxes that have recently or would soon increase:
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