Ohio HB 571: Taxing a Tax

Orange cartoon character with a big text “tax”.

“Taxation is theft” is a well-used Libertarian motto, even by the minarchists in the party, like me, who concede that some government is necessary, and therefore must be paid for somehow.  The reason we say that is that tax money is extracted from the taxpayer at the point of a gun, at least by implication.  Government levies the taxes, even when the taxpayers themselves have been conned into voting for them, and if you don’t ante up, the big, bad taxman will be around one way or another to seize your home, your paycheck, your bank account, or anything else you own, or just haul you off to jail for “tax evasion.”  And if you resist, you’ll see that gun.

So we argue back and forth about what kind of tax is least offensive, there being no kind of tax that isn’t offensive in some degree.  Some of us are inured to an income tax, and seek ways to make it more fair (some kind of flat tax) and, always, to keep it as small as possible.  Supporters of the “Fair Tax” prefer its tax on the sale of new products, with a guaranteed rebate attached for every taxpayer.  Still others believe that user fees, such as gasoline taxes, are the least unfair way to separate the people from their money.  But whichever one a given Libertarian might prefer, none of us really like any of them.

But some taxes are even more despicable than others.  And it seems that State Representative Dave Greenspan (R-Westlake) has managed to find one of the worst.  Recently, Greenspan introduced House Bill 571, which would levy a new tax on hotel transactions through online travel agents (OTAs) such as Expedia or Priceline.  While this is, of  course, fundamentally just another grab for the people’s wallets, this one is being sold on an appeal to people’s envy, and a false appeal at that.  Greenspan and his co-sponsors (co-conspirators?) would have you believe that the OTAs are getting away with murder because their transactions are not taxed.  And they’re right to this extent: when you book a hotel room through one of the OTAs, there is no tax added to that transaction.  But that does not mean that you are not being taxed.

I am a “lifer” in the hotel business myself, having spent more than 35 years doing almost everything that an employee can do in a hotel, professionally speaking, at least.  One thing I can tell you is that renting a hotel room is among the most heavily-taxed transactions you can enter into.  Here in Ohio, when you pay your hotel bill, you are also paying a county and a state hotel tax, on top of the usual sales tax that you pay on a new lawnmower, or a book or magazine, or almost anything else you buy.  In Mahoning County, where I live and work, that tax totals 15.25 percent.  In other words, if the room itself costs $100, you will pay $115.25, with the last $15.25 going to one level of government or another.

Now, when you book that room through Expedia, for instance, the hotel will charge them whatever the rate is that the hotel has negotiated with Expedia plus all the applicable tax.  Expedia then bills you for that total, plus their fee, a percentage, which is how they make their money.  The only portion not being taxed is that fairly thin percentage that the OTAs live on.

Now comes Greenspan and his new tax proposal.  He’d like to levy a tax on the entire transaction, the entire amount that you are paying the OTA for your hotel room.  Make sure you have the whole picture on this.  Greenspan wants to tax the transaction fee (not already taxed, and the smallest part of the total transaction in most cases) and the nightly rate for the room (which is already being taxed, heavily) and he wants to tax you on taxes you’re already paying.  That’s right!  Greenspan wants to tax your tax!  By the time he gets done, more than one dollar out of every five you pay to your favorite OTA will actually be going to the government.  And your $100 hotel room will now cost you $125 – or more!

So if taxation is theft (and it is!), Greenspan wants the state to steal from you twice!  Even by normal standards, this is unfair and excessive.  For the record, this particular piece of robbery was tried once before and voted down.  Let’s hope that a majority of our critters in Columbus haven’t completely lost their minds, and will vote it down again.

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