Lawsuit Challenges Vacation Taxes

Posted on July 18, 2005
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Hotel and rental car taxes are like the sunburn after a vacation, reminding tourists that the fun is over and there's a price to pay.

While a little aloe vera helps a painful sunburn, there's not much relief for tourists suffering vacation bills made more expensive by local governments seeking more tax revenue.

But Michael Devine, a tourist from Michigan, is suing for relief after being hit with a one percent levy on his hotel room and a 3.5 percent levy on his rental car. Maricopa County voters adopted both taxes five years ago as part of a plan to finance Glendale's football stadium. Devine contends that taxes targeting out-of-state residents violate the U.S. Constitution, which reserves to Congress the power to "regulate Commerce among the several States."

Devine argues that the rental car tax also violates the Arizona Constitution, which requires taxes on the registration, operation, or use of vehicles on public roads to be used for highway and street projects, not stadiums.

Whatever the merits of Devine's legal arguments, such taxes are simply poor economic policy. Despite promises of economic growth, the consensus among economists is that publicly subsidized stadiums do not improve the local economy.

Taxpayers could use a vacation from bad economic policy.

Key Links:
-Arizona Daily Sun: "Tax for stadium sparks lawsuit"
-Cato Institute: Debunking the Economic Case for  D.C. Baseball
-Cato Institute: "The Stadium Gambit and Local Economic Development"
-Arizona Constitution, Article 9, Section 14
-U.S. Constitution

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