New Study Reveals Cities With The Highest And Lowest Taxes For Travelers

On a recent road trip, I stopped for the night in suburban Indianapolis and was happy to find a nice hotel room for just $91 per night. But in the morning, when I saw the receipt that was slipped under the door and noticed a total bill of $106.47, I thought that there was some mistake.

In huge cities like New York and Chicago you expect punitive taxes on travel related expenses, but could the hotel tax rate really be 17% in the Hoosier State? A stroll down to the front desk confirmed that there was no mistake and according to a newly released report from the Global Business Travel Association (GBTA), Indy has one of the highest hotel tax rates in the country.

I don’t know about you, but when I’m planning a trip, I don’t think much about taxes, but I probably should because in some places they can really drive up the cost. I tend to look at the room rate or the rental car rate itself, and by the time I get to the confirm page where you see the taxes, I’ve more or less already made my decision and somehow I think I’m paying $91 for the room in Indy, rather than the $106.47 it will come to with taxes.Since the start of the Global Recession, politicians in cash strapped municipalities all over the country have been looking for ways to make up for budget shortfalls and hitting out-of-towners is a convenient way to escape the wrath of local voters. According to the GBTA’s fifth annual report, “discriminatory travel taxes and fees enacted on travel-related services impose an average increased cost on visitors of 57% over general sales tax.”

So what are the most and least taxing cities for travelers? It should come as no surprise to see New York and Chicago on the taxing list, but why are Portland, Oregon, and a few places in California in the least taxing column? Portland actually shows up in the top ten least taxing list because Oregon has no sales tax, but it also shows up in the top most discriminatory taxes list (which doesn’t count taxes that apply to everyone, just those that apply to travelers) because it has a very high rental car tax rate.

A number of municipalities in California lowered their sales tax rate in 2011 and made the least taxing list based on that. The biggest surprise for me is the fact that Honolulu made the least taxing list.

Highest Overall Tax Burden for Travelers

The following figures reveal how much a traveler would pay in taxes for one day of travel, including a $103.45 hotel room, a $55.99 rental car and $91.22 in meals at restaurants. Chicago hits the trifecta with crippling taxes on hotels and rental cars plus a high sales tax rate, giving it the overall tax crown.

Chicago- $40.33
New York- $37.98
Boston- $34.83
Kansas City- $34.58
Seattle- $34.43
Minneapolis- $34.32
Cleveland- $34.22
Indianapolis- $34.19
Nashville- $34.13
Houston- $33.51

Lowest Overall Tax Burden for Travelers

Ft. Lauderdale, FL- $22.21
Ft. Myers, FL- $22.21
West Palm Beach, FL- $22.21
Detroit, MI- $22.37
Portland, OR- $22.45
Orange County, CA- 22.79
Burbank, CA- $23.74
Ontario, CA- $24.08
Honolulu, HI- $24.38
Orlando, FL- $24.50

New York City has the highest hotel tax rate, followed by Nashville, Indianapolis and Houston. Chicago has the highest rental car tax rate, followed by Boston, Las Vegas, and Minneapolis.

One might ask what these cities are doing with the tax revenues they collect from travelers. Are they using the money to promote their destination or to enhance the tourism infrastructure? The answer varies from place to place, but looking at Chicago, for example, just 1% of the 16% hotel tax goes toward tourism promotion, according to the study.

In most European countries, prices for hotels, rental cars, meals and almost everything else already include the applicable taxes. As a consumer, I find this very straightforward in that you know exactly what you’ll pay, but it also masks where your money is going. You might think that 100€ you’re paying for a hotel room is pricey, but you may not be aware that the hotel is losing a large chunk of that revenue to the tax collector.

Do you pay attention to the tax rates when planning travel, or are they just an afterthought? If the city has a high hotel tax rate, will you choose a less expensive hotel or go to a different city altogether? Would you like to see hotels and rental car companies display or explain the tax rates in a more transparent way when you book through the Internet or over the phone?

[Photo by 401K 2012 on Flickr]

Spain Raises Airport Taxes

The government of Spain has announced that it is raising airport taxes.

The amount of the increase depends on the airport, with the average being 18.9 percent. Taxes at the two busiest airports, however, will more than double. Madrid’s Barajas airport will increase from 6.95 euros to 14.44 ($8.64 to $17.94). Barcelona’s El Prat airport will go from 6.12 euros to 13.44 ($7.60 to $16.70).

Ryanair and Vueling have already passed the extra fee onto their passengers. Other airlines have yet to decide how to respond. The tax is retrospective for those who booked before July 2, 2012, and are traveling from July 1 onwards.

Spain is one of the most troubled economies of the Eurozone. It has recently been granted up to 100 billion euros ($124 billion) in bailouts for its banks and the government is planning harsh austerity measures in order to balance the books. With summer tourist season kicking into high gear, the increased tax will bring in tens of millions in much-needed funds, assuming it doesn’t turn away too many tourists.

[Photo of Madrid’s Barajas airport courtesy Andres Rueda]

British Brewery Campaigning To Save Traditional Pubs

I’ve talked before here on Gadling about how British pubs are in danger. In 2011, an average of 14 per week shut down, and the trend is continuing. This is due to a number of factors, including the economic downturn, competition from cheap supermarket alcohol and ever-increasing taxes.

Now Wychwood Brewery has started an online petition to “Stop the Beer Duty Escalator.” Taxes on beer go up annually at 2 percent above the rate of inflation. The petition says this adds “considerably more pressure on the British pub, the cornerstone of many of our communities” and asks for this practice to stop.

“Going to the pub is a core British tradition and so is enjoying great beer,” the petition states. In a company statement, Wychwood Brewery said, “Imagine a world without pubs. Imagine communities with no heart. Imagine thousands of livelihoods affected.”

While this sounds like exaggeration, anyone who has lived in the UK for any length of time knows that it isn’t. Pubs really are a cornerstone to the national culture. The majority of people are regular pub goers, either for a quick pint of real ale or to watch a game or to enjoy a Sunday roast. They’re also a great way for tourists to experience the country and meet locals. The withering of that culture is reducing quality of life. I spend every Easter and summer in Oxford and every year I see prices go up and pubs close. It’s depressing.

Wychwood is aiming for 100,000 signatures, which will force the petition to be heard in the House of Commons. So far they have 27,517. If you’re a resident of the UK, I say sign this petition. You’ll be fighting for one of the nation’s cultural institutions and helping independent businesses.

[Photo courtesy Andrès Moreno]

Ryanair cuts 1000 jobs and 150 flights over German air tax increase

When the German government recently announced a new tourist tax designed to offset their budget woes, many airlines announced they’d be forced to cut flights and jobs. So far, Irish low cost carrier Ryanair has been the only one to actually deliver on that threat.

Because of the upcoming tax, the airline is reducing its presence at Frankfurt Hahn airport. At the moment, Ryanair operates over 530 flights from Hahn, and will bring that down to 382. In the process, 1000 jobs will be lost. Three of the airlines Boeing 737 aircraft will be moved to other airports in their route network.

From Frankfurt, this also means the loss of routes to Berlin, Prague and Gothenburg. The size of the Ryanair operation in Frankfurt is massive – and this reduction in flights means the airline will handle 1 million fewer passengers a year.

If Ryanair is just the first of German based airlines to make cuts like this, the proposed €8 tourist tax will most likely all go to waste on unemployment benefits for fired workers.

[Photo credit: AFP/Getty Images]

Taxes could make discounted hotels more expensive

If your next hotel stay is more expensive than you expected, blame the government. State and local governments, still reeling from the recession, are looking for any source of revenue they can grab. And, they’re next target seems to be online travel agencies.

Online booking sites, such as Expedia and Orbitz, negotiate a rate with hotels for available inventory, market it up a bit and pass it along to the travel-buying public. The business model is pretty straightforward. The problem comes down to which room rate should be used to calculate state and local occupancy taxes. At least 40 lawsuits have been filed over the issue, as local governments have rewritten ordinances to try to add a bit more to the coffers.

There’s a lot at stake, according to a USA Today report. Approximately $1 billion a year is perceived to be lost by state and local governments.

Yet, is it really lost? The online travel agencies are paying the hotels, and according to Andrew Weinstein, spokesman for the Interactive Travel Services Association:

“Occupancy taxes are based on the rate the hotel sets and receives,” he says, “not the profits, fees or commissions of its partners. … The facilitation fees are no more part of the hotel rate than the taxi that takes the guest from the airport or the tip they give the bellhop.”

How do you feel about this issue? Leave a comment to let us know if it’s what the hotel gets or what the occupant pays that should matter for tax purposes.

[photo by Howdy, I’m H. Michael Karshis via Flickr]