Taking the Mickey

by Henry on June 30, 2008

More on the Mickey Tax, courtesy of a set of talking points forwarded by my person in the Travel Industry Association, which are (to put it mildly) quite unconvincing on the major points of contention. I’ve decided to adopt this piece of legislation in the same way that some people and organizations adopt highways – expect more on this over the coming months. Also, NB that this is one of those activities where the Internet really has changed everything – it would have been infeasible for me to investigate this stuff without Congresspedia, online access to Her Majesty’s Government’s taxation guidance documents for airlines etc. Talking points and response below the fold.

1) Remarkably (given the weak dollar), the U.S. welcomed two million fewer overseas visitors n 2007 than in 2000—despite an increase of 35 million new “long-haul” travelers around the world.

There may indeed be an underlying problem here, but the dates are undoubtedly being cherry-picked. As the Washington Post notes in its account of the background to this bill.

The industry had a second problem, as well. Visits to the United States were beginning to climb again—on their own, without federal assistance. According to the Commerce Department, the number of international visitors increased 12 percent in 2004. It increased again in 2005, by 7 percent. The travel industry preferred to emphasize a different, narrower set of statistics. It liked to focus on visitors from overseas rather than all inbound visitors. The reason? Overseas tourists from Europe and Asia, unlike those from Canada and Mexico, tended to stay longer and spend more, two attributes hotels and restaurants coveted. But, unfortunately for travel industry advocates, even the number of visitors from overseas rose 7 percent from 2004 to 2005. Faced with such facts, other executives might have shied away from rushing to the government for help. But not Rasulo.

2) The reasons travelers are avoiding the U.S. are an outdated visa system, inefficient entry process and growing post-9/11 perception that visitors are not welcome.

There is some truth to this – but see above. Also note that the bits of the legislation that directly address the inefficiencies of the entry process etc appear to have been added on as window dressing to make the main element of the bill – the whopping big promotion budget – more palatable.

3) The Travel Industry Association is leading the way in reforming the visa and entry process and made great legislative strides in 2007, including an expansion of the Visa Waiver Program, $40 million for more Customs and Border Protection officers at airports and a new international registered traveler program for frequent visitors.

Standard lobby-group self promotion, neither to be greatly condemned nor taken seriously.The registered travel program has gotten a lot of (in my opinion, well deserved) flack, but that’s a side-issue.

4) But it’s not enough to just change the policy, we have to change the perception.

Here we start getting to the issues of contention. People are unlikely to feel welcomed by having a new fee assessed upon them, so that the owners of big tourism destinations can tell them in glossy brochures exactly how welcome they are. Not that this new fee is intended to solve the underlying problem anyway, if vigorous opposition from the airline industry (who would presumably welcome a proposal genuinely aimed at increasing numbers of travelers), is anything to go by.

5) The U.S. is the only developed nation that does not have a nationally-coordinated program to communicate its travel policies and promote travel to the country.

This may be true (I can’t be bothered to check it out) – but doesn’t justify the imposition of new charges on incoming tourists.

6) The Travel Promotion Act would create a fund to communicate and promote travel to the U.S. (not to any single destination). 50% of all funding would come from the private sector—matching contributions would come from a $10 fee on travelers from Visa Waiver countries (those travelers who don’t pay $131 for a visa).

See below for more on the $10 fee. The not-having-to-pay-$131-for-a-visa stuff is a red herring. Visa fees aren’t fed into a fund designed to promote specific bits of the US tourist industry.


7) Americans pay these fees and fund competitive promotion programs all over the world. In fact, the United Kingdom charges all travelers departing by air at least 40 pounds. This fee is collected on the airline ticket.

This is where we start tip-toeing into the realm of active dishonesty. The UK charge that’s being discussed here is the so-called Air Passenger Duty. It differs from the proposed boondoggle in two rather important ways. First, it is collected on all travelers leaving the UK, regardless of whether they are American, European, Chinese or indeed loyal subjects of Her Majesty Queen Elizabeth II. As such, it is a standard universally assessed tax – not a particular levy on non-nationals. Second, contrary to the clear implication of the talking point it doesn’t directly ‘fund’ a ‘competitive promotion program.’ Instead, it goes into the general fiscal coffers of Her Majesty’s government. Presumably, a teensy-weensy little bit of this money goes to fund promotional activities. Given that there are a number of tourism promotion agencies in the UK, I haven’t been able to do any back of the envelope calculations of how much, but I would be startled if more than a few pennies of the forty quid or more go to fund tourism promotion.


8) The legislation caps the fee collected at $10—at no point would this fee rise beyond $10. The fee is to be collected via the Department of Homeland Security’s new Electronic System for Travel Authorization. DHS may choose to add on to the fee in order to cover their separate costs of comparing the electronic I-94 information with FBI information. This portion of the fee is coming regardless of whether or not the Travel Promotion Act becomes law.

Again, this seems somewhat at odds with the truth. First the claim that “the fee collected at $10—at no point would this fee rise beyond $10.” The precise wording of the bill is that the fee may “include an amount, initially not more than $10, for transfer to the Travel Promotion Fund.” The ‘initially not more than’ obviously leaves rather a lot of wriggle-room. Second, the claim that the accompanying fees are going to happen anyway. This is not what the Bill says – instead, it provides for the transfer of “such amounts” as will “ensure” that the Act is fully funded. The language makes it emphatically clear that the additional administration fees (which I understand are likely to raise the total amount to $25) are linked to the fund, not to any separate DHS program.

9) If the U.S. wants to welcome more visitors, it must better explain its ever-chainging post-9/11 policies and compete for visitors in a challenging marketplace. The Travel Promotion Act creates a public-private partnership to do that at NO COST TO AMERICAN TAXPAYERS and is modeled after programs at the state level (e.g., Florida and California) and countries around the world.

Most of this is standard pabulum – but the guff about NO COST TO AMERICAN TAXPAYERS in caps goes to the heart of the issue – who pays. Again, the Washington Post has some helpful insights.

The lobbying team argued over how to raise the $200 million without relying on an annual appropriation from Congress; a permanent, government-imposed funding mechanism would be ideal. BKSH, led by travel industry lobbyist Charles L. Merin, had quietly compiled a crazy quilt of alternatives and put them into a memo. These included a national travel lottery (“dismissed because of the likely strong opposition from the anti-gambling interests”); a rental car tax (“dismissed because of the difficulty in enacting any kind of tax increase regardless of political control of Congress”); and even the issuance of “a commemorative coin or series of coins.” This last one was not dismissed out of hand. One thing everyone agreed on: The travel industry did not want to pay for the ads itself.

I can see an argument for using the government to impose a general obligation on industry members to solve collective action and free rider problems (there may be problems with this too – but that’s a different debate). But I can’t see any good reason for imposing the Mickey Tax on unwitting visitors to the country other than (a) the big players in the travel industry wanted to foot as little of the bill as possible themselves, and (b) given the politics of the issue, they didn’t have any other easily available group that they could fob the costs off on. This is what has gotten us the pig’s dinner of a legislative proposal that we have before us, which on the one hand claims to promote America to foreigners, and on the other does so in a manner calculated to piss off as many aforementioned foreigners as possible.

10) The Travel Promotion Act has wide bipartisan support because it is rightfully viewed as exactly the role of the federal government—as demonstrated by nearly every other developed nation.

Umm no. Developed nations usually don’t impose specific tourism promotion taxes on visitors. Some developing nations do, but they confront a quite different set of issues.

{ 3 comments }

1

Down and Out of Sài Gòn 06.30.08 at 9:45 pm

The Travel Promotion Act creates a public-private partnership to do that at NO COST TO AMERICAN TAXPAYERS and is modeled after programs at the state level (e.g., Florida and California) and countries around the world.

That makes no sense. Does California tax visitors from Arizona and New Mexico? I think not.

2

Tracy W 07.01.08 at 4:20 pm

From memory, when I was working for the NZ government, every now and then there was an attempt to impose a fee on overseas visitors to pay for the national parks, at which point the Ministry of Foreign Affairs would point out we had signed some international agreement that we would only impose fees on overseas visitors that were directly related to the costs of providing the ports and port services. For the life of me I can’t recall the name of the agreement, but it would not surprise me that the USA had signed it too. I am mentioning it in the hope that someone else will remember it.

Secondly, from my experience, the winner for arguments for more government spending is the NZ film industry. If it is doing badly, it argues that it needs government funding to improve matters. If it is doing well, government funding is obviously essential in order for it to build on its successes! The LOTR films were vital to kickstart the NZ film industry (the films got a tax break), and once they were done, more government funding was vital to take advantage of the wonderful benefits of the LOTR films.

3

DWAnderson 07.02.08 at 3:24 pm

For obvious reasons, the airlines despise this tax.

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