Cities and states are pumping up their coffers at the expense of visitors. Unemployment has led to a fall in income taxes, and with consumer spending off, sales taxes aren’t bring in what they did in the past. So, municipalities have had to look elsewhere.
And, travel is a great place to start!
How can a city or state raise money without incurring the wrath of its own voters? You guessed it – travel taxes. Hotels and rental cars are favorites, because the likelihood of nailing a resident with the tax is low. While you’d think that these additional fees would keep tourists away, it’s not likely. There are probably a handful of tax activists out there who’d rather dump tea in a harbor, but it’s unlikely to be the minority.
Last year, hotel room taxes brought in $14 billion, but the take is expected to fall this year, even with the higher rates proposed. After all, hotel occupancy rates are at their lowest levels since 1956 – a sluggish 55.5 percent – according to PKF Hospitality Research.
Who’s getting in on the action?
Hawaii: the hotel room tax hit 8.25 percent on July 1, 2009 (up from 7.25 percent) and will go up to 9.25% a year from now.
New Hampshire: the “Live Free or Die” state bumped its hotel room and restaurant tax to 9 percent (from 8 percent) and has stretched it to include recreational vehicles at campgrounds.
Massachusetts: look for the ol’ “Taxachusets” jokes to come back with a 50 percent increase in the hotel tax (from 4 percent to 6 percent) and an increase in the restaurant tax from 5 percent to 6.25 percent. Cities can add another 0.75 percent to the latter if they like.
New York City: as if the March 1, 2009 hotel tax increase to 14.25 percent wasn’t enough, the city will hit internet reservations for a bit more tax revenue.