We Love New York -- Just Less Than We Used To

By Matt Towery (Archive) · Friday, July 3, 2009

Who are the richest people in town? Here's a hint: Every dime they have is disposable income.

The answer is tourists. And they increasingly are the victims of the soak-the-rich mentality that has resurfaced with a vengeance in a time in which politicians are looking for ways to accomplish the paradoxical tasks of raising revenues, expanding government services and keeping voters from taking to the streets in rage. Taxing tourists looks like the fabled silver bullet to elected officials.

The latest episode is in New York City, where Mayor Michael Bloomberg has just signed into law a new measure that deals with booking hotel rooms over the Internet. It seems some online travel services have been buying hotel rentals wholesale, and then charging tourists the bed tax at the retail rate, with the bookers pocketing the difference. City officials see the new law as a way to put an end to the practice.

It's unclear what the effect of the new law will be. Some booking agents will now be paying more taxes, but will they keep their booking rates the same or raise prices on travelers to cover their "losses?"

Regardless, the city's new policy brings into daylight a practice that New York and heaven knows how many other cites have copied from despotic governments from way back -- taxing people who have no electoral voice to fight back. Taxation without representation, I believe it's called.

Although there is a dearth of survey data on the effects of bed tax hikes on tourism, New York City officials say the new law will bring in a bunch of new revenue.

They're probably right, at least in the short term. So how, you might ask, does this square with the notion that economic growth runs in inverse proportion to tax rates? Put another way, why wouldn't more and more tourists stay home if bed taxes keep rising?

The reasons this cornerstone belief of conservative fiscal policy may not be entirely true is twofold. First, as I've already mentioned, it's hard for taxpayers to protest a tax when it's imposed on them by government officials they don't elect.

But the second reason may be the key -- awareness, or lack of it. Mosey on down to your city hall or state capitol, and try to collar a lobbyist who represents tourists and business travelers. You're unlikely to find one. There's spot evidence here and there that this may slowly be changing. The first activist front is likely to be car rental taxes, but bed taxes may not be far behind.

And yet no amount of lobbyist arm-twisting is likely to scare politicians who are far more afraid of the twin-headed monster of dwindling government revenues and tea-partying voters than they are of resentful tourists in the car next to them.

The strike-back against confiscatory cities like New York is likely going to have to come the old-fashioned way -- by John and Jane Q. citizens refusing to open their wallets by staying home in the first place. Most travelers may not look at their hotel bill with the microscope (and the thesaurus) needed to see just how much tax they are paying. What they will notice more and more as the economy slowly slogs on, however, is the rising total bill they're footing to put them in the same city as the Statue of Liberty and Carnegie Hall.

Let's face it: People vote with their wallets, too. What an irony if the travelers' revenge came in the form of a lack of additional money for a major city to pay for that spanking new baseball stadium or that sprawling new convention center. Cities in effect are trying to build new tourist attractions by sticking it to tourists. Justice might be if the tourists stuck it to cities by taking next year's vacation at home, or if businessmen and women held that meeting by teleconference instead of in person.

The numbers are few on whether that's happening yet in significant numbers. But the U.S. recession shows few signs of relenting anytime soon. And the longer Americans have to go without, the more skilled they're likely to get at cutting corners. Common sense -- and economic law -- says that sooner or later, more and more of them are going to pinch pennies by sleeping in their own beds at night. Sooner or later, the silver bullet of bed and other tourist taxes may boomerang and hit tax-and-spend politicians right between the eyes.

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