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Top city for taxing travelers? Chicago

Courtesy GBTA

Planning a trip? Yellow stars refer to cities with the lowest total tax burden for travelers. Red flags refer to cities with highest total tax burden.

The only certain things in life are death and taxes, to paraphrase Benjamin Franklin. But when it comes to taxing travelers, at least, all cities do it differently.

Those are the findings of a new report that lists the best and worst travel taxes of the top 50 U.S. destinations.

“A traveler spending a night in Chicago can expect to pay an average of 81 percent more in taxes than when visiting Fort Lauderdale, Fla., all else being equal,” said Joe Bates, vice president of research for the GBTA Foundation, which released the 2012 annual report on Monday.

The GBTA Foundation is the education and research arm of the Global Business Travel Association (GBTA), a trade group for corporate travel managers and suppliers based in Alexandria, Va.

This year’s report, “Travel Taxes in the US: The Best and Worst Cities to Visit,” found that taxes targeting travelers impose an average cost of 57 percent more than general sales taxes. Taxes on travel-related services, called discriminatory travel taxes, are for things like hotel stays, car rentals and meals at restaurants. These travel taxes are above and beyond the general sales tax, are borne largely by travelers, Bates said, and are often used to fund local projects unrelated to tourism and business travel.

Bates said the goal of the report, which highlights the hidden costs of travel, is to help travel managers make informed decisions on behalf of their companies about where meetings and events could best take place, as well as to assist local convention and visitor bureaus, eager “to make their cities as attractive as possible.”

The findings could also be valuable for independent travelers. “It’s very, very challenging for the average consumer,” Bates said. Travel taxes “are not typically published and can really add a significant cost to your trip if it’s not something you budgeted for.”

The top 50 markets are ranked two ways: by overall travel tax burden (general sales tax and travel-related taxes combined), and by travel-related taxes only. Portland, Ore., for example, has no general sales tax but a very high travel tax. The report also includes separate data for central city and airport locations, as the tax structures are often distinct.  

This is the fifth year that research has been conducted. In general, the average travel tax rate and the cities with the highest and lowest rates have remained fairly consistent, Bates said. Chicago, for example, has been on the top of the list for all five years for cities with the overall highest rates. However, compared to 2008, when the first report was issued, the percentage difference from highest to lowest travel tax rate has shrunk. “Cities over time have tended to be more competitive, so that’s good news,” Bates said.

Courtesy GBTA

Courtesy GBTA

Bjorn Hanson, dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, applauds the report. 

“It is very difficult for most travelers to find out this information,” he said. 

Meeting and convention demand, followed by nonprofits, are the most affected by these taxes, Hanson said, as both groups have travel professionals to be aware of these expenses and often have large numbers of travelers to accommodate, so costs are especially important when choosing a location.

Leisure demand will be less affected, as destinations are chosen based on a variety of factors, and leisure travelers are generally less aware of these taxes or do not know whom to ask about them, he said. And business travel demand is the least affected because those travelers often must go to specific destinations.

However, Hanson noted that the total cost of the trip should be factored in when making travel plans. For example, a city with high travel taxes might be a better bargain overall due to lower costs for things like airfare, hotel and restaurants. Conversely, a city with modest taxes might be more expensive overall.   

Due to the need for revenue in some municipalities and states, discussions were ongoing among officials regarding increasing or adding taxes, especially hotel occupancy taxes, and travelers are at a disadvantage, because they do not take part in the process. “It’s taxation without representation,” Hanson said. But while tax rates may be on the rise in some areas, because it is an election year, “I don’t think it will be a dramatic change.”

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