U.S. Travel Association: San Mateo County Travel Tax Will Hurt Economy

The latest proposed travel tax hikes in San Mateo County (Bay Area), CA will damage the local economy, make San Francisco International Airport (SFO) less competitive, and generate far less revenue than county officials estimate, according to a new economic impact study released by the U.S. Travel Association.

Economists found that SFO could lose 100,000 vehicle rentals a year if just one of the measures were to pass.

"This study sends a clear message to San Mateo County voters: 'Vote No on new travel taxes,'" said Roger Dow, president and CEO of U.S. Travel. "Visitors spend more than $21 billion a year in the Bay Area. It is self-defeating to slap new taxes on travel goods and services because ultimately these taxes hit business travelers, families on vacation, or folks attending a convention or conference at the very time when their business is needed most."

The study, conducted by Rockport Analytics, a travel research firm, analyzes two measures that San Mateo County voters will consider when they head to the polls on June 5: Measure T, a proposal to raise taxes on all SFO car rental receipts, and Measure U, a proposal to boost the hotel occupancy taxes on SFO-area hotels.

While the Board of Supervisors suggests these tax increases will close the county's budget deficit, the Rockport Analytics study found that the Board's revenue projections are significantly overstated, U.S. Travel says.

Specifically, the study found:
    •    The Board's estimates that the new taxes would generate $7.7 million in revenues for the county are overstated by 31 percent because the Board's analysis fails to consider consumer reactions to higher prices.
    •    Raising the car rental tax will increase prices and slash traveler demand, causing a $3.7 million loss in annual revenues and lowering tax revenues by $2 million.
    •    The proposed rental car tax hike would increase SFO's total tax burden – taxes and fees on transactions and receipts – to 54.2 percent, saddling SFO with the second highest rental car tax burden among major U.S. metro airports.

Moreover, nearby communities such as Oakland and San Jose would directly benefit from the tax hikes, as travelers shift their plans in response to higher prices. The proposed hotel occupancy levy, for example, makes tax rates at SFO-area hotels higher than hotels near Oakland International Airport or San Jose International, both of which are less than 50 miles from SFO.

"SFO is a primary growth engine for San Mateo County as well as the broader Bay Area economy," said President and CEO of the San Francisco Travel Association Joe D'Alessandro. "Singling out rental cars and hotels at SFO for punitive tax treatment will simply drive travelers to other airports – and they will take jobs, wages and spending with them."

Study author Kenneth McGill, managing director of Rockport Analytics, stressed the study's conservative estimates and said that a higher-tax reality could be even grimmer: "In today's tight economy, consumers are highly sensitive to price increases, so the consequences of these tax hikes could be even worse. New taxes could cut a family's four-day stay to three, result in fewer meals in restaurants or less spending in local shops, or even result in a cancelled trip."

In addition to Measures T and U, San Mateo County voters will also consider Measure X, a new 8 percent tax on parking at SFO. The Rockport Analytics study, commissioned by San Francisco Travel in partnership with U.S. Travel, did not examine the effects of this new tax.

The San Mateo County Board of Supervisors proposed a similar set of new taxes in 2008, but local voters soundly defeated the measure, proving that proposals to raise taxes on business and leisure travelers are unpopular, U.S.Travel said.

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