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December 2012

Watch Out for Those Hidden
Travel Taxes This Holiday Travel Season

The Thanksgiving-to-Christmas Holiday Season is fast approaching and is the peak family travel time of the year. I have written often about the need for consumers to get clear pricing, tax, and fee information from merchants. This information is vital for us to make an educated decision on how much we will have to spend to travel to a certain location. I have frequently witnessed unexpected taxes and fees being added to my flight, hotel, rental car, meals, and other related activities. Often these taxes and fees are not readily apparent at booking because it is not in the interest of the local taxing authority or business to make clear from the beginning what are the “extra” travel taxes and fees because this may weigh into my decision whether or not to make the trip to their community.

Municipal Tourist Taxes.  The Global Business Travel Association Foundation calculated travel tax impacts in September by combining the general city sales tax in selected cities with what it terms “discriminatory travel taxes on car rentals, hotel stays, and meals” that are “targeted at travelers.” Chicago has the highest tax burden ($40.31), followed by New York ($37.96), Boston ($34.83), Kansas City ($34.58), Seattle ($34.43), and Minneapolis ($34.32). Among the lowest are four cities in Florida, including Fort Lauderdale ($22.21), Fort Myers ($22.21), West Palm Beach ($22.21) and Orlando ($24.50), as well as Detroit, Michigan ($22.37), and Portland, Oregon ($22.45).

Federal Airline Ticket Taxes.  Airline consumers pay up to 17 different airline ticket taxes and fees that add cost just like additional sales taxes. First, you pay a 7.5% percent federal excise tax, then a $3.70 per flight segment tax for the Airport Trust Fund, followed by up to $18 in Passenger Facility Fees to pay for airport upgrades, then up to $2.50 per flight segment “September 11th Security Fee” (to a maximum of $10 per ticket). Total ticket taxes can add nearly 30 percent to a $200 ticket and the fees are even higher for international travel. To this you add luggage handling fees, fees to upgrade your seats, etc.

Prior to January of 2012, it was difficult for consumers to determine up front how much they would really pay for a flight. However, a U.S. Department of Transportation rule took effect earlier this year requiring airlines to inform potential customers of the “full cost” of the airline ticket. Certain airlines argued this rule allows the federal government to “hide” its taxes in the overall cost. On the other hand, California U.S. Senator Barbara Boxer argues that this a consumer protection measure intended to ensure consumers know the entire cost of the ticket rather than just the “teaser” price advertised by the airlines.

This rule is creating a trend. Most rental car agencies have begun disclosing taxes and fees when consumers are booking reservations. Hotel chains such as Marriot are doing the same.

The Wall Street Journal recently cited a survey indicating 19 percent of surveyed travelers changed their travel plans due to high local taxes. I count myself among them; for example, I avoid staying in Chicago and Cook County, Illinois, due to high sales taxes. Rather, I stay in neighboring—and lower tax—Lake or DuPage counties.

Will high travel taxes and fees impact your holiday travel plans?

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