A Stitch in Haste

Since I’m vacationing, here’s an apropos post (“apropost“?).



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A favorite maneuver of local governments, especially tourist destinations such as New York, is to “tax the visitor.” My favorite example in the Big Apple is our obscene hotel tax, currently at 13.75% + $2-4/room-day.



A hotel tax is by definition overwhelmingly, almost exclusively, paid by visitors. Point conceded — for now. But what about other “visitor taxes” — such as a rental car tax?

Members of Flexcar, the national car-sharing company that started in Seattle, will now have to pay the state and King County car rental tax, according to the state Department of Revenue.

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Flexcar spokesman John Williams said the company started operating in Seattle in 2000 and this is the first time the car-rental-tax issue has come up. “Our issue is that Flexcar is a car-sharing company, not a car rental company,” he said. “Over 90 percent of the users are Seattle residents.”

The purpose of a tax is to raise revenue. Therefore, the purpose of a tax collector is to apply the tax as expansively as possible. This is not new news. The notion that “locals will be spared” always comes with the footnote, “until we decide otherwise.”



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As for conceding the point that “a hotel tax is by definition overwhelmingly, almost exclusively, paid by visitors,” that is only true superficially and partially.



Suppose there were no hotel tax at all. The tourist would have that much more money in her pocket whilst visiting. Perhaps she would go to one more show. Maybe she would spend more in restaurants, shops and clubs. Maybe she should stay an extra day, making the hotel itself better off. Perhaps her friend back home — who couldn’t afford the hotel with the tax — would end up tagging along. And so on.



The visitor remits the tax, but does not necessarily pay all of it. A tax on tourists is passed on, at least in part, to the businesses that cater to those visitors. And, derivatively, to the employees of and investors in those businesses.



A “visitor tax” would only make perfect sense if visitors brought negative externalities with them — if the visitor tax were a Pigou tax. But that can’t be right: travel destinations like tourists, don’t they?



Bottom line: Another economic absurdity peddled as “smart policy” to dumb residents, voters and taxpayers. Plus ça change…



(Via Tax Policy Blog.)



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On a tangent:

FlexCar is a tax-paying company, unlike its competitors ZipCar and City Carshare which number among the annoyingly large group of companies that provide commercial services but have somehow persuaded the government to qualify them as nonprofit organizations that don’t have to pay income tax.

You can probably guess which faux non-profit company evokes my ire the most.

Similar Posts:

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• New Species Discovered: The Alaskan Tax Vulture
• Check-Out Time for Hurricane “Hotel People”
• Cable v. Satellite: Tax as Tax Can
• Which States Have the Best/Worst Tax Policies?

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