Tourists pay as taxes rise

Taxes on travel are soaring as states and cities target the wallets of tourists and business travelers for new revenue.

Hotel taxes, car rental fees and other charges were jacked up in many states in an effort to balance budgets by last week, when the fiscal year started in 46 states.

Popular tourist destinations were hit especially hard. Among places where taxes rose:

•Hawaii. The hotel room tax increased from 7.25 percent to 8.25 percent on Wednesday and will rise to 9.25 percent in July 2010.

•Nevada. The room tax will increase by up to 3 percentage points, to a maximum of 12 percent. In Las Vegas, the hotel tax jumps from 9 percent to 12 percent. Reno’s tax was already 12 percent and is not scheduled to change.

•New Hampshire. The tax on rooms and restaurant meals rose from 8 percent to 9 percent and was extended to include recreational vehicles at campgrounds.

•Massachusetts. Cities were given authority to raise the hotel tax from 4 percent to 6 percent, in addition to the state tax of 5.7 percent. Taxes on eating out will rise from 5 percent to 6.25 percent statewide, plus another 0.75 percent if cities choose.

•New York City. The city, which raised its hotel tax March 1 to 14.25 percent, not counting other fees, will start charging more for Internet reservations.

“You couldn’t pick a worse time to make it more expensive to rent a hotel room,” says Mark Woodworth, executive vice president of PKF Hospitality Research in Atlanta. Hotel occupancy this year will be at its lowest level – 55.5 percent – since his company started keeping track in 1936, Woodworth said.

Legislators say tax increases were needed. New Hampshire, which doesn’t have a sales or income tax, made painful spending cuts in addition to raising taxes and fees, said New Hampshire state Rep. Marjorie Smith, a Democrat.

“We didn’t have an enormous number of options, and that was one,” she said.

Room taxes generated $14 billion in 2008, the American Hotel & Lodging Association reports. That amount is expected to fall in 2009, even with higher tax rates.

Car rental fees are rising, too. A new 5 percent tax at the Newark airport will fund economic development. Wisconsin approved raising the car rental fee in Milwaukee from $2 to $18 to subsidize mass transit.

Adding an $18 fee to a car rental is outrageous, said Caleb Miller, of the National Business Travel Association. “In what other context can you charge a 50 percent tax rate and get away with it?” he said.

He said businesses are very sensitive to travel costs in this recession and higher taxes hurt local businesses, not just visitors from out of town. “It’s not the whole story to think, ‘We tax someone from out of town. What’s the big deal?’ ”

Most travel tax hikes ran into light opposition this year. The Nevada Hotel and Lodging Association didn’t oppose the state’s hotel tax hike aimed at generating $100 million a year. “We support education,” said Van Heffner, the association’s president. “What could we do? We stayed neutral.”