Thanks to a pair of bold votes by city and state officials in recent weeks, taxes on most hotel rooms in New York City will soon be coming down 6%.
The tax cut, a rarity among revenue-hungry cities and a startler in the city with the highest bed taxes in the nation, has sparked hope among tourism industry optimists that other cities will follow with reductions of their own. Those less optimistic say they'll be pleased if the move merely serves to discourage further increases around the country. Either way, if there's a trip to New York in your future, your bill is likely to be a few dollars less than it would have been.
Bed taxes, which can be levied by local or state governments or both, have become a politically expedient tool for raising government revenues in recent years: While the levies bring in new money, the people paying the taxes--tourists--generally aren't around to cast votes in the city or state that sets the rates. "Taxation without representation" is the familiar phrase often employed by enemies of the bed tax. (Most governments in Europe and around the world tax hotel rooms too, but travelers may not notice because hoteliers often build the tax rate into the prices they quote to customers. In New York and other U.S. cities, conversely, you'll generally find the tax tacked on in addition to the nightly rate you were quoted.)
While cash-strapped state and local governments have been thanking their lucky stars for these taxes, hoteliers and others in the tourism trade have argued that American cities are sabotaging themselves as tourism destinations. In New York City, convention bureau officials claimed that 44 gatherings worth $52 million in tourist revenues were driven away last year by high bed tax rates. Those arguments have been widely ignored, until now.
Unfortunately for travelers, says John Marks, president of the San Francisco Convention & Visitors Bureau, "there's no indication that any California cities are looking at reducing the hotel tax at this point. I think that you have to keep in mind that the New York tax was off the charts . . . beyond reality."
The average cost of a New York City hotel room last year, according to a convention bureau survey of 231 hotels, was $137.81--before taxes. Then came the one-two punch of city and state hotel tariffs, which added 19.25% plus $2 to the cost of every hotel room priced at $100 nightly or more. (Rooms under $100 were taxed 14.25% plus $2.)
But on June 8, New York's state legislature, led by Democratic Gov. Mario Cuomo, voted to repeal its 5% levy on rooms over $100, effective Sept. 1. Then, acting in the earliest hours of June 22 in prolonged budget hearings, New York City officials (led by Republican Mayor Rudolph Giuliani) agreed to shave 1% from the city's side of the tax on all hotel rooms. That cut is effective Dec. 1. The hoteliers, it seems, persuaded elected officials they were being penny wise and pound foolish.
The bottom line: New York City's bed tax on all rooms will fall to 13.25% (of which 4.25% goes to state coffers and 9% to the city) plus $2. And New York will lose its title as home of the highest bed taxes in the land.
Richard Altman, manager of communications for the New York Convention & Visitors Bureau, immediately set to calling convention planners and predicting an upturn for his city's massive tourism industry, which brought in 25 million visitors and an estimated $14 billion in spending last year.
By the reckoning of the Campaign to Keep Travel Competitive, a Washington-based lobbying group supported by about 40 travel industry groups, the major U.S. city with the highest bed taxes is now Columbus, Ohio, with a 15.75% bed tax. In the wake of New York's cutback, says the campaign's director of tax policy, Rick Webster, Columbus city officials "are gonna be stuck out there like a sore thumb."
California has no state-imposed bed tax, and like most states it exempts hotel rooms from state sales taxes. But California's most-visited cities have embraced the bed tax as a revenue-generator. Los Angeles charges 14% in bed taxes; Anaheim, 11%; Sacramento, 11.5%; San Diego, 9%; San Francisco, 12%; San Jose, 10%.
Here, by the count of the Campaign to Keep Travel Competitive are the U.S. destinations with highest bed-tax rates:
Columbus, 15.75%; Seattle, 15.2%; Houston, 15%; Chicago, 14.86%; Cleveland, 14.5%; Los Angeles, 14%; St. Louis, 13.85%; New York, 13.25% plus $2 per night; Knoxville, 13.25%; Memphis, 13.25%; Atlanta, 13%; Austin, 13%; Dallas, 13%; San Antonio, 13%; Nashville, 12.25%; Washington, D.C., 11% plus $1.50 per night; New Orleans, 11% plus $1-$3 nightly. (Several more cities charge bed taxes between 11% and 12.25%, but don't add on surcharges like those imposed by Washington and New Orleans.)