U.S. Travel Association Criticizes Tax Hikes Targeting Travelers

By Kate Rice

The U.S. Travel Association is criticizing what it calls a sweeping tax hike proposed by the San Mateo County, Calif., Board of Supervisors. The travel group says the tax hike punishes travelers and should be dropped.

The county board just announced plans for a 2.5 percent rental car tax increase, a 2 percent hotel occupancy tax hike, and a new 8 percent parking tax as part of an effort to address the county’s general fund budget deficit. The taxes would be charged to all travelers renting vehicles from San Francisco International Airport (SFO), staying in SFO-area hotels, or parking at SFO and local hotels.

Travelers renting vehicles at SFO already shoulder a significant tax burden, according to the U.S. Travel Association. In addition to the 8.25 percent state sales tax, SFO rental car customers currently must pay 11.11 percent in airport concession taxes and a 2.85 percent California tourism tax -- a total tax rate of 22.21 percent.

The proposed increase would raise the total rental car tax to 24.71 percent. The proposal represents an 11.3 percent hike in the current car rental tax and a 20 percent boost in the hotel occupancy tax, currently set at 10 percent. The parking levy is a new tax.

The San Mateo County Board of Supervisors proposed a similar 2.5 percent rental car tax hike and 8 percent parking tax in 2008, but county voters soundly defeated the measure.

Results from a national survey commissioned by U.S. Travel in April 2011 suggest that travelers would react negatively to the proposed tax hike. In the 2011 survey, 49 percent of travelers said they alter plans due to high travel taxes.

Nearly two-thirds of travelers surveyed (64 percent) said the total tax rate on rental cars is “much more” than they expected to pay compared to other travel taxes. And nearly seven out of 10 (68 percent) travelers described hotel taxes as “high” or “very high.” Only 14 percent of surveyed travelers said “non-travel related expenditures” such as “contributions to government general funds” would be an “appropriate” use of travel taxes.