New York to tax travel, the web

New York has been scrambling for tax revenues, and no stone has been left unturned (including my beloved cigars, which are now costing me more than they did a week ago). Well, the Empire State looks like it’s now going after my second passion: travel. Visitors who book hotel rooms on sites like Expedia or Orbitz could get slapped with a higher total price if a proposed tax on lodging booked online goes through.

For a local, it’s pretty tempting to support this measure. I don’t spend a whole lot of time in hotel rooms here, unsurprisingly, because I already have a roof over my head. And, the notion of making out-of-staters shell out for the services I consume is pretty attractive. After all, it’s a net gain for the state – and for me. But, there are two aspects of this proposed travel tax that disturb me.

The first is the usual: higher prices for one sector of the travel booking business create a skewed competitive landscape, imperiling the abilities of several companies to compete and effectively destroying wealth. It’s hard for me to be in favor of that, as a general rule. Also, the higher prices, due to the proposed taxes, could constrain demand and lead to less tourist revenue coming into the city. Like taxes paid by people from out of state, money spent by these people is also a net gain for the state … and it’s ultimately more productive.

So, taxes = bad, spending = good. I know; this isn’t tough stuff.

The other side of this proposed tax is actually more problematic. It’s a tax on web sales, effectively. The web has generally been safe from inane taxation, and I was hoping (more than a little) that it would stay that way. According to the New York Times:

The measure, included in the budget that lawmakers in Albany completed on Tuesday, reclassifies third-party vendors under the tax umbrella of hotel operators, requiring them to collect the same sales tax.

At the moment, travel sites buy hotel rooms from hotel operators at a price that includes the 4 percent state sales tax. They make the rooms available to consumers at a higher price, but no sales tax is collected on the difference in price. The new provision, which takes effect on Sept. 1, eliminates the loophole.

The folks up in Albany expect this violation of the freedom of the internet to be worth $10 million this fiscal year … which seems like an awfully small return on an investment in the deprivation of dignity and freedom – not to mention putting an unnecessary and anti-competitive constraint on the online travel agency business.

Don’t worry, fellow travelers: we want your money in this state so much that litigation seems likely. Says Colin Tooze, vice president for government affairs of the American Society of Travel Agents: “I expect that one or more affected parties will consider litigating.”

[photo by n8kowald via Flickr]

Kimpton takes the edge off tax season

‘Tis the season for taxation. We gather up our W-2s, sift through 1099s and try to figure out just how painful the experience is going to be for our wallets. Tax season isn’t the most pleasant of experiences for many, so Kimpton Hotels & Restaurants is hoping to take the sting out a little bit. With its “Sweet Tax Relief” deal, Kimpton will make sure tax time leaves you with an enjoyable taste in your mouth – for a change.

To start, participating Kimptons will pay your room tax for you, for stays during the entire month of April. And, your meal tax will be picked up when you throw down some grub at its restaurants. If you’ve ever taken a close look at your restauant receipt or hotel folio, you know just how substantial this savings can be. To sweeten the pot, so to speak, candy bars like “Payday,” “100 Grand” and “Sugar Daddy” will be provided, which you can munch on while waiting for your late checkout to come.

According to Niki Leondakis, chief operating officer of Kimpton Hotels & Restaurants, “Tax season can be a stressful time of year and this fun promotion is a great way for travelers to save a few dollars on the road and enjoy some sweet treats.”

Are you paying for an airstrip of convenience?

Taxpayers are paying to subsidize several airports around the country. Many don’t service commercial passengers and do very little to add to the communities in which they reside. Take Williamsburg-Whitley County Airport in Kentucky. It was built with $11 million in cash from the U.S. government and usually sees only a handful of flights a day take off or touch down – some days, the runway is empty.

The source of this largesse? A federal program that few know about. To understand what’s going on, you’ll need to think back to the last airline ticket you bought.

You know the drill, there’s the price on the screen … and then there’s the price you pay. In addition to the fare, you realize quickly that fees and taxes can mount to seemingly absurd proportions, but you have little choice in the matter. The taxes alone can hit 15 percent of what you pay for a flight. Have you ever wondered where that money goes?

(Well, now you know that a piece of it goes to Williamsburg-Whitley County Airport.)

Some of the tax money from air travel transactions is used to build new airports and maintain others – a network of 2,834 in total in the United States – that do not service passenger flights. These “general-aviation” airports are separate from the 139 commercial airports in the country that take care of almost all passenger flights.

USA Today, which deserves a hell of a lot of credit for digging into this, reviewed the first full examination of the 28-year-old Airport Improvement Program and found that $15 billion was sent to general-aviation airports. That’s a considerable amount of cash to give recreational fliers a place to land.

In all fairness, there is probably some truth to the notion that these airports can attract commercial and residential development and provide some important services around medical transport via air, as some members of Congress insist. But, is it enough to justify the expense?

To Congressmen, perhaps.

USA Today reports that that “[m]embers of Congress took 2,154 trips on corporate-owned jets from 2001 to 2006,” per a 2006 study by independent research group PoliticalMoneyLine. Again, in fairness, some of these airports actually provide access to their constituents. But, should a taxpayer in San Francisco finance an airport in North Andover, Massachusetts?

However you quantify the utility, it seems as though the cost is a lot higher than the benefit.

Jonathan Ornstein, CEO of Mesa Air Group (a regional), tells USA Today, “Congressmen are spending millions building runways at these little airports. That is just a complete waste of money.” This is especially the case, he says, when “there is a huge requirement to overhaul infrastructure at major airports.”

Click here to read the entire investigation and analysis; it’s worth it.

Maldives President proposes green tax for tourists

The Maldives, an archipelago of over 1000 islands in the Indian Ocean known for their stunning beauty and expensive, luxurious resorts, aren’t exactly cheap to visit. And they aren’t about to get any cheaper. The President of the Maldives has proposed a $3 per day “green tax” on tourists.

The tax would help fund the President’s plans for fighting climate change and for making the Maldives a carbon-neutral country within the next decade. He has a vested interest in stopping global warming – the Maldives are the lowest-lying islands on the planet, with an average elevation of only 7 feet above sea level, and it is estimated that they could be completely submerged by rising sea levels within the next ten years.

With an average of 700,000 visitors, who each stay around three days, visiting the Maldives annually, the tax could provide the country with over $6 million per year for environmental initiatives. With most resorts in the Maldives costing $500 (or much more) per night, $3 per person, per day is a small price to pay to help protect this vulnerable country from the dangers of climate change.

Increased passenger ticket fee may help pay for airport expansions

Ever paid attention to the breakdown of the fees tacked on to your ticket? In addition to the $2.50 9/11 security fee, and a government tax of about $4, you also pay a passenger facility charge (PFC) of $4.50.

This PFC is how the government pays for all the horribly outdated airports in the country. That is right – proceeds from selling $9 airport sandwiches are not enough to maintain and expand airport facilities. And neither is the current PFC – which is why a proposal has been made to raise the PFC from $4.50 to $7.

I’m guessing the government saw how the airlines were raking in the cash from luggage fees, and decided they wanted a piece of the action.

The increase should bring in billions of additional Dollars – an airport like Chicago O’Hare sees 70 million passengers a year, multiply that by $7, and you have a nice chunk of change. Then again, with an upcoming $5.5 Billion expansion plan scheduled for O’Hare, they need all the help they can get.

Thankfully, this $2.50 increase is actually very modest – international airports charge far, far more for the luxury of landing at their airport. Amsterdam charges a $90 “noise isolation charge and passenger service charge”, Glasgow airport charges $145 for the UK PSC. But the real winner here is London Heathrow, with a $155 PSC.

When you fly to these airports in a premium cabin, the fees can be as high as $300. So really, $2.50 seems like a pretty good deal if you ask me (these charges are all averages – some flights can be lower, some higher).

The proposal has been approved by the house, and is currently pending before the U.S. Senate, but chances are, it will become reality very soon.%Gallery-28218%