A Taxing Situation for Travel

The travel industry and the travelers we serve are both easy targets for politicians bent on raising more revenues. Since travelers are not represented by the politicians in the areas where they travel, they make tempting targets for governments bent on getting more revenues. Indeed, this fact brings taxation without representation to the forefront of any discussion on the topic. Taxes on travelers dramatically increase the cost of any trip and also risk creating a deterrent to travel itself. Since the only repercussion to the political class for raising these taxes is a potential loss of demand, and not votes, they can literally do it with impunity. 

Let’s get down to the numbers and put things in perspective for when you or your clients travel. Twenty percent (and sometimes more) of the typical airline ticket price is made up of government taxes and fees. This number has crept up over the years and puts a larger burden on the traveler and can lead to slower demand as the overall cost of air travel continues to increase. This doesn’t bode well for all of those businesses in the “down line” that can be impacted by a slackening of demand. As I’ve written before, this includes hotels, restaurants, attractions, taxis and more. 

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When was the last time you stayed at a hotel in New York City? If you didn’t notice, the taxes imposed on your hotel stay can boost the cost of that room by almost 20 percent. On a recent stay where the room rate was $329, I was hit with an additional $54 in taxes. This included a state sales tax, a city tax, and an occupancy tax and Javits tax.  Javits tax? Yep, for that wonderful Javits trade show and conference center. You might be asking yourself: “Why am I paying something for a convention center that I’ll never see?” Good question. All of these taxes add up to one more way travelers get fleeced. 

When it comes to car rentals, it’s even worse. On a recent rental in Las Vegas that cost $67, my total bill came to almost $100.  What made up that extra $33, or a 50 percent increase, on top of that rental? It’s a long list that I’ll detail for you here: First, there’s the concession fee recovery. When I think of concession, I think of the ballpark and a beer and a dog. Neither came with this particular charge. Second, there’s the facility fee. Is that the place they keep the car? Oh yeah, this doesn’t go to the car rental company, so probably not. Third, there’s the vehicle license cost recover…but wait, I didn’t lose my license! And of course there’s the sales tax. Oh yeah, I almost forgot one more. Since you’re driving the car, and need to fill up, let’s not forget the gasoline tax. Are you dizzy yet? 

The endless tax burden being placed on you, your clients and the travel industry creates an effect that can include, but is not be limited to, the following: Consumers get deterred from traveling as the cost of these taxes pushes prices to the point where demand diminishes. Hotels and other players effectively “subsidize” the government and add to these endless taxes by having to lower their prices to offset the tax burden. Profits that should have been earned by the private sector are redistributed via taxes to political pet projects, most of which have nothing to do with travel in and of itself. 

Imagine what could happen if travelers could spend more of their money on goods and services and less on filling the coffers of local and state governments? Overall tax receipts would increase as businesses at all levels would benefit by spurring an increase in overall demand. But don’t expect that to happen anytime soon!