Cost to Taxing Visitors

For years more than a few elected officials across the country could be heard to quip that taxing visitors is painless because they can’t vote.

Recently, some business people have chimed in, but notably they almost always represent businesses that don’t collect or pay taxes, e.g., media, lawyers etc. I’ve even heard non-profits propose some businesses be taxed then turn around, when a tax is proposed on their customers, and cry foul.

People like me have always cringed and--given the opportunity--objected if for no other reason than it is so blatantly disrespectful and because we know this bit of conventional wisdom couldn’t be further from reality.

There is simply no such thing as a painless tax. Part of the reasons why occupancy taxes fund visitor promotion is to offset the drag from the tax and grow and protect revenues, then leverage greater revenues through other taxes paid by travelers such as general sales tax.

Visitors may not vote, but a tax impacts local spending and therefore jobs, personal income and even tax collections, and the local people impacted by this can vote.

But let's be real; travelers do vote…just not at the ballot box. They vote with their feet and pocketbooks by shortening trips, shifting to less expensive purchases, traveling less frequently, selecting alternate destinations and, for some at the margins, not traveling at all. Some are even beginning to lash back on principle, with websites popping up to help travelers identify where they are being gouged by taxation unrelated to tourism.

The impact is not just on the specific business being taxed. For example, travelers feeling the weight of a tax on one business, e.g., hotel rooms, will shift spending in ways that impact others like restaurants, retail stores, entertainment, sports etc.

Economists like Dr. Charles de Seve have long been able to compute the impact of a tax and specifically how much can be passed on to the consumer vs. absorbed by the business, its revenues, employees and tax contributions locally.

It's time for business leaders and elected leaders alike to demand greater respect for tax payers, whether they are local or not, whether they vote or not. Because it's respectful and because it's good business.