The USA Today today published a summary of recent increases in tourism taxes enacted by state legislators trying to escape the consequences of their chronic overspending. Such fiscally irresponsible states include:
•Hawaii. The hotel room tax increased from 7.25% to 8.25% on Wednesday and will rise to 9.25% in July 2010 (This tax hike came on the heels of reports that show Hawaii’s tourism sector has declined substantially due to the current economic recession, and hotel occupancy rates have fallen to 75% – the lowest level since 1991. It should be noted that Governor Lingle rightly vetoed this legislation, but this was overturned by the legislature.)
•Nevada. The room tax will increase up to 3 percentage points, to a maximum of 12%. In Las Vegas, the hotel tax jumps from 9% to 12%.
•New Hampshire. The tax on rooms and restaurant meals rose from 8% to 9% and was extended to include recreational vehicles at campgrounds.
•Massachusetts. Cities were given authority to raise the hotel tax from 4% to 6%, in addition to the state tax of 5.7%. Taxes on eating out will rise from 5% to 6.25% statewide, plus another 0.75% if cities choose.
•New York City. The city, which raised its hotel tax March 1 to 14.25%, not counting other fees, will start charging more for Internet reservations.
The effect of these changes will not be more revenue – it will simply be less tourism. With the tourism industry already struggling with the current economic downturn, these taxes will discourage even more people from travelling tho the states in question.
This is kicking an industry when its down. Doubtless, many hotels and other tourist enterprises will be forced to shut their doors for good, leaving tens of thousands of Americans unemployed. There can be no doubt that this is the death knell for many small business tourist operations.
Elsewhere, politicians have looked to slug tourists by increasing car rental taxes, for instance in Portland, Oregon where the Motor Vehicle Rental Tax has been increased to a whopping 17%. As we pointed out earlier, rental car tax hikes have significant deleterious effects on local economies – one study shows that a recent localized tax hike led to a 9% reduction in car rentals and up to an 86% reduction in the number of days people rented cars. Even when tourists decide to rent a car, they compensate for increased travel costs by spending less on meals, hotels, and other activities.
Increasing taxes is never the solution to overspending. For a real economic stimulus, cut the size of government and get the private sector working again. Without a return to job-creation through small government, our future is dark indeed.