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Taxes add to travel costs

By Kay Bell · Bankrate.com
Tuesday, December 17, 2013
Posted: 3 pm ET

The final burst of travel for 2013 is upon us, with folks heading home for the holidays.

Business travelers, however, are on the road or plane or train or bus throughout the year. And in 2013, they probably paid more in taxes to conduct business.

That's the word from the Global Business Travel Association, or GBTA, Foundation's annual study of car rental, hotel and meal taxes in the top 50 U.S. travel destination cities. Those taxes, according to the study, increased the 2013 total tax bill for travelers by 58 percent.

If you went to Chicago on business, you paid the most in taxes, says the GBTA Foundation's study. A Windy City stay for one day cost travelers $41.04 in taxes, including not only the charges on traditional travel-related expenditures, but also the state's and city's general sale taxes.

New York City came in second in the 2013 survey with visitors paying $38.65 per day in taxes. Rounding out the 10 U.S. cities where travelers in 2013 incurred the highest total tax burden are Minneapolis, Kansas City, Mo., Indianapolis, Cleveland, Boston, Seattle, Nashville, Tenn., and Houston.

Federal travel taxes, too

State and local taxing jurisdictions have long viewed visitors, whether in town for business or pleasure, as welcome sources for money.

Cities and counties regularly enact special taxes on hotels and other travel-related resources in order to pay for special projects, such as expanded transportation programs.

But Uncle Sam is getting in on the act, too, says Michael W. McCormick, GBTA executive director and chief operating officer.

McCormick points to the two-year federal budget deal just hashed out by Congressional budget committee chairs Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis. That proposal, which has passed the House and is expected to be approved by the Senate, includes a substantial increase of the Transportation Security Administration, or TSA, charge.

The TSA security fee would more than double, going from $2.50 per each leg of a connecting flight (currently capped at $5 per trip), to a flat $5.60 each way on a trip. Airlines pay the fee, but any passenger can tell you that such costs typically are passed on to passengers.

"Governments insist on treating travelers like their ATM," said McCormick in a statement released in conjunction with the annual study. "These types of punitive travel taxes will ultimately push business travelers to stay home, and we all pay when governments take a short-sighted approach that raises the costs for business travel."

Lowest travel taxes

Where can business travelers expected to get a relative tax break? GBTA also listed the 10 lowest-taxed big-city travel destinations.

The cheapest places as far as travel-related taxes, including the locations' general sales taxes, are three Florida cities: Fort Lauderdale, Fort Myers and West Palm Beach. Each of those Sunshine State cities will cost visitors $22.61 a day in taxes.

The seven other lowest tax travel locations are Detroit; Portland, Ore.; Orange County in California.; Burbank, Calif.; Honolulu; Ontario, Calif.; and Orlando, Fla.

Is it just coincidence that most of those cities are also popular tourist destinations? I don't think so. Beach-adjacent spots in Florida and Hawaii and cities on both coasts that are home to or near iconic amusement parks know that business travelers might just bring along the family and tack on a few extra days for fun after they wrap up their company meetings.

What the cities might lose in immediate tax collections, they make up in added volume.

If that scenario appeals to you, remember that you can combine business and personal travel and still collect some nice travel tax breaks.

***

Want the latest news on taxes, tax reform prospects, filing deadlines, political fights, Internal Revenue Service alerts and tax-saving tips? Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter: @taxtweet.

Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and co-author of the e-book "Future Millionaires' Guidebook."

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