The Best and Worst U.S. Cities for Travel Taxes

Yesterday’s Wall Street Journal had an article on the effect of taxes on the cost of travel.  After retirement, many people want to travel so the effect of taxes on hotels, air fare, food and rental cars can have an impact on the cost of your trip.  The effect of taxes can be quite dramatic.  For example:

In Chicago, the tax on a case of Miller Lite beer runs about 9%. That pales in comparison with the 16.4% tax on a hotel room and the 23% tax on car rentals at O’Hare International Airport. … 

The hotel-tax increase in Chicago, which had the highest total tax burden for travelers of any city in the survey, raised the total hotel levy there to 16.4%. That includes a 2% tax to help pay for the Chicago White Sox stadium, 2.5% to help pay for the McCormick Place convention center and state taxes as well. Chicago’s rental-car tax is even higher. The tax on a $56, one-day car rental at the airport raises the cost by 23%.

The tax on air fares is also fairly steep.

There are a total of 17 potential different taxes and fees levied by the federal government and airports on airline tickets. Passengers pay a federal excise tax to help fund the Federal Aviation Administration, a security fee to help fund the Transportation Security Administration, various fees for international inspections and fees charged by airports for passing through terminals.

On a typical $300 domestic ticket with one connection, the airline fare is really $238.88 and taxes and airport fees are $61.12—more than 20% of the $300 cost comprises taxes and government fees. By comparison, a pack of cigarettes that costs roughly $12 in Chicago has $5.67 in federal, state, county and city taxes, or about 47% of the cost.

As you plan your trip, be sure to ask your agent if the price quotes includes all applicable taxes and fees.  When local politicians go in search of more tax revenue, they will often decide to tax the traveler rather than the resident, knowing that residents may vote them out of office if taxes get too high, but travelers can’t vote against them.

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