Three Western states have targeted travelers as a source of
much-needed revenue, adding new taxes to the price of hotel rooms
and rental cars. Montana already has started collecting the new
taxes; Oregon and Alaska will start early next year.
The money is expected to help offset multimillion-dollar
deficits in the three states, but it could also put a crimp in
already sluggish travel as price-sensitive visitors face growing
With the new levies, seven states in the West now tax tourists
on top of tourism-related taxes levied at the county or local
levels in all Western states.
“Tourism taxes are popular because the people who are going to
pay aren’t the ones voting,” said Bill Ahern, a spokesman for
Washington, D.C.-based research group, the Tax Foundation. “Because
of that, states will try to extract as much as possible from
For Montana and Alaska, the tourism taxes will offset their lack
of a sales tax and, in Alaska, an income tax. Until now, Montana
has relied on capital gains and income taxes, while Alaska has
steep local and property taxes.
Voter pressure spurred Montana lawmakers to overhaul the state’s
tax structure this session, pushing them to cut capital gains and
In exchange, lawmakers increased the statewide bed tax by 3
percent, bringing the total to 7 percent, and levied a new 4
percent car rental tax.
While a $250 million deficit will postpone the tax cuts until
2005, the tourism taxes took effect in July and are expected to
contribute $11 million to the state’s general revenue this fiscal
“We’re not asking out-of-towners to shoulder the burden, but we
are asking them to help a little,” said Betsy Baumgart, division
administrator with the Montana Promotion Division.
Alaska will also start taxing rental cars with a new 10 percent
tax and a 3 percent tax on RVs.
The taxes are expected to generate $6 million a year for the
state’s general fund. Some of the tax money will be used to offset
the cost of tourism promotion and new infrastructure.
Cruise Tax Sought
Alaska, which has a $400 million deficit, has long considered
taxes on tourists, and a citizens’ initiative is seeking a vote
next year on taxing cruise passengers and ship casino revenues.
The group’s petition to have the proposal placed on a state
ballot has so far been rejected by state officials.
“It shows up every single year,” said Caryl McConkie, a tourism
manager for the Alaska Division of Community and Business
Development. “It’s very difficult to pass legal muster and then
also to get the support. It’s something we talk about every year
but we’re unlikely to see happen.”
What’s more likely to pass, according to McConkie, is a
statewide sales tax, and a $15 charge for a “wildlife viewing pass”
to help promote wildlife education and conservation.
In Oregon, lawmakers approved a 1 percent hotel tax expected to
raise about $7 million a year. About 70 percent of the tax will be
used to promote tourism, nearly doubling the current budget, which
is one of the lowest in the country. The remaining 30 percent would
be split for city and county programs. The tax takes effect Jan. 1
and is also expected to revive the state’s tourism sector, which
has lost 1,100 jobs in the past year.
Lodging taxes are currently added to the hotel bills in 14 state
counties and average about 8 percent, according to state tourism
Texas, Idaho and Hawaii each have statewide lodging taxes, all
of which help fund tourism promotions. Utah has a statewide car
rental tax used to fund future highway right-of-way purchases.
Hawaii’s 7.25 percent hotel tax generates $170 million in
revenues to help fund the state’s four county government and
tourism marketing projects.
Eight percent of a lodging tax collected in Texas goes to
promote tourism, totaling $20 million. The rest is added to the
state’s general revenues. But over-reliance can have drawbacks,
according to Alex Nikoloff, a research specialist at Michigan State
University’s Tourism Resource Center.
Revenues from such taxes are predicated on visitors, he said,
noting that, “After September 11, a lot of cities couldn’t pay the
bills because they relied too much on tourists.” "