Taxing Times for Travelers
(March 2001)
While going over my car
rental agreement at the airport in Manchester, NH, I noticed a $2.25
customer facility charge. When I asked the agent what this fee was
for, she stated, "That's the airport fee to use the new sidewalk
going to the garage." I rolled my eyes in disbelief—I had to pay
$2.25 to walk on a sidewalk! On top of that, there was a 10 percent
airport fee, a vehicle license fee of $2, an eight percent state
tax, and a 50-cent fee labeled a "Frequent Flyer Tax Recovery
Surcharge," since I had used my US Airways Dividend Miles to accrue
miles. When all was said and done, these taxes increased my rental
car bill by approximately 23 percent.
Taxes Are
Growing
If you are a traveler, be prepared to dish out a
good percentage of your hard-earned cash to the taxman. Industry
figures estimate U.S. travelers will spend more than $80 billion
this year in travel-related taxes, and local taxes are increasing at
warp speed. A family of four traveling from Boston to Orlando for a
week-long stay at Disney World would face just over $220 in travel
taxes. The list of taxes seems to grow daily, significantly driving
up the cost of traveling.
Air Travel & Airport
Taxes
Every time you fly you pay a federal airline ticket
tax of 7.5 percent plus a $2.25 per segment tax. According to the Air Transport Association (ATA), the segment
charge will increase by 25 cents every year through 2003. In
addition to these federal taxes, there are also local airport
passenger facility charges (PFC) at most of the top 50 U.S.
destinations. These too may rise because of a law signed last year.
If you travel on international flights, be prepared to open your
wallet even more; you will encounter customs user fees and federal
inspection fees.
Then there are the airline fuel surcharges.
A surcharge is not a government tax, but is instead, the way
airlines pass along their increased fuel costs without changing
their base fares. Fuel surcharges are hit-and-miss because airlines
have not unilaterally imposed them. On average, fuel surcharges have
been $10 per segment, but again, this varies by carrier.
Hotel Taxes
The bed tax is the government
tariff assessed on most hotel rooms in the U.S. and abroad; overall,
it can add between 10 and 20 percent to a hotel's advertised rate.
According to recent figures from the Travel Industry Association
of America (TIA) bed taxes averaged 12.36 percent in the top 50
destination cities in the U.S. In the U.S., taxes are excluded from
quoted prices. However, in some foreign countries, such as the U.K.
and France, the government requires hotels to include such taxes in
the rates they quote so travelers know their total costs.
Car Rental Taxes
Out of all the travel taxes,
car rental fees are the most confusing. The daily rate for your
rental car is just the beginning. The base car rental tax rate
averages 8.25 percent. In addition to this tax, most cities tack on
numerous fees to the base rate, such as the sidewalk fee I was
charged in Manchester. For example, many cities add surcharges
averaging $2 a day, or they charge $2.50 per rental. Other cities
charge a fee for renting cars off airport grounds, adding an
additional 8 percent on average. Some even tack on an off-airport
fee that averages an extra $2.75 per rental, and some states, such
as again Connecticut, even add a tourism tax of a $1 a
day.
Cruise Port Taxes
Cruises are very popular
because of their basic approach to an "all-inclusive" vacation.
However, the base price for the cruise often doesn't include port fees. Port fees, per-passenger fees that most
ports-of-call charge for all cruise ships, are assessed separately
to cover expenses associated with an individual country's port.
Depending upon the length of the cruise, these fees usually average
$100 or more per person.
Where Is The Money Going
All proceeds from PFCs are allocated to maintaining the
airports' facilities. Revenues from airline user fees, including a
tax on domestic airline tickets, a cargo waybill tax, an
international departure tax, and taxes on aviation fuel go into the
Airport and Airway Trust Fund. This fund was set up in 1970 to help maintain and improve the nation's aviation
infrastructure. According to data from the Committee on Transportation and Infrastructure, user fee tax revenues into
the trust fund this year will be approximately $9 billion. Sadly,
for many years these tax revenues were being diverted to
non-aviation spending, tax relief, and debt reduction. Only last
year did former President Clinton release funds to start the
necessary improvements for our aviation infrastructure. Every flier
is paying the price for the years these funds were misappropriated.
As an example, delays due to our beleaguered air traffic control
system are all too commonplace. If the funds had been spent
accordingly to begin with, we may not be dealing with this problem
today. What's worse, it will take years for the system to get back
on track.
In some cities, the travel tax money goes to help
pay for new tourism facilities such as convention centers and
visitor welcome centers, or to pay for advertising to encourage
travelers to visit that community. In other cities, the travel tax
money goes to general funds that are allocated to education, police,
or social services in that community. Some cities do both. However,
the most controversial spending of these taxes is sports-related.
Cities that are renovating existing sports stadiums or building new
ones have raised hotel and car rental taxes to help finance these
projects.
Be Prepared
While taxes are
necessary to support infrastructures for tourism, travelers need to
educate themselves before departing on that vacation for which
they've saved so hard. When pricing a trip, ask for the price
including all taxes and surcharges. If you are unclear about certain
fees, ask for a detailed explanation. That way, you can develop an
accurate budget and avoid being surprised when faced with the actual
bills.
Related Link
World Travel &
Tourism Tax Policy Center
Click here to return to article index
