Koo-Koo's new scheme- spreading out hotel tax

If we ever get back to state budget negotiations, we might get a look at yet another tax scheme from Rep. Dale (Koo-Koo) Kooyenga, after his first plan to abolish the Alternative Minimum Tax for rich Wisconsinites was quickly shot down. This time Koo-Koo wants to stick it to travel agencies, and make those businesses (and the individuals who use them) have to pay additional tax to make up for other tax cuts.

"The revenue picked up will go towards reduction of other taxes," said Kooyenga, a member of the Legislature’s Joint Finance Committee. "In part, we are doing this by ‘broadening the base,’ a solid principle of tax reform and creates fairness between hotels and the out-of-state booking companies."

The article goes onto to explain what Koo-Koo is trying to “fix”, where a booking agency like Orbitz gives $80 of the $100 it collects to the hotel, while keeping $20 as its commission for having someone buy through their site. Apparently that $20 isn’t charged sales or local taxes, but instead is taxed later under the travel agency’s profits.

Needless to say, the travel agencies aren’t too pleased about this.

The Travel Technology Association disputes Kooyenga’s pitch, calling it flat out wrong. The trade group based in Washington, D.C., includes Orbitz, Expedia, Priceline, Airbnb and other online travel sites. The additional sales tax on the service fees charged by those businesses, and bricks-and-mortar travel agencies like Adelman Travel Group, represents a form of double taxation, said Philip Minardi, a spokesman for the Travel Technology Association.

Here’s why, the association says: Orbitz and other travel agencies pay business taxes or income taxes on the revenue from their service fees. That income would be taxed twice if the businesses also had to pay a sales tax.

“The concept that online travel agents are taking advantage of a loophole is 100 percent false,” said Steve Shur, the president of the Travel Technology Association. "The argument that Wisconsin needs to ‘close a loophole’ is simply a veiled attempt at passing new taxes onto the backs of in-state travelers, small businesses and the entire travel and tourism economy."

And you can see where putting that additional tax onto a travel agency’s commission is a problem, because this will likely raise prices that people pay when they book a room (unless you think the travel agency will casually take the hit to the profits, HAH!), and/or give an advantage to the hotel for booking people directly. It also could discourage people from staying at hotels due to the higher prices, or not finding out about certain Wisconsin hotels because they don't want to have their prices seem higher, which would also cut into the profits of the online bookers.

There is no LFB analysis to see how much would be raised through Koo-Koo’s plans to “broaden” the sales tax, nor how much in income and business taxes that might go away. Which also means there is no guarantee as to whether this amount will totally offset the losses in revenue that would come from changing tax rates for married people or the AMT, which is what Koo-Koo claims he’s still looking at doing.

Needless to say, this is one of many potential twists and turns that still need to be ironed out in this budget, with less than 2 weeks to go in the fiscal year. Sure, the state won’t shut down if the budget isn’t done on time (everything stays at the same levels they were before), so it’s not as urgent as it may seem at first glance. But this bill is quickly becoming an even bigger mess for the Wisconsin GOP than we already knew it was, and last-minute goodies and "adjustments" that people like Koo-Koo are trying to hand out may make things even worse. Stay vigilant.