If newly introduced legislation is passed, the US government (aka taxpayers) could be footing the bill for your next vacation.
Details of the American TRIP Act
The tourism industry is obviously suffering, and I recently wrote about how the Trump Administration proposed a new travel stimulus concept. This was only thrown around as a concept in May, and nothing seemingly came of it, at least for a while. Well, that has now changed.
US Senator Martha McSally, a Republican from Arizona, has introduced legislation this week that would encourage Americans to support the tourism industry following the coronavirus pandemic.
The newly introduced bill is called the American TRIP (Tax Rebate and Incentive Program) Act, and it would:
- Provide tax credits to Americans who spend money on lodging, entertainment, and other expenses related to travel in the United States
- Provide funding for Destination Marketing Organizations (DMOs) to promote the travel and tourism industry across the nation
This bill comes as McSally is up for reelection in Arizona, though she is behind in polls. Maybe it’s not even fair to say she’s up for “reelection,” because she wasn’t elected in the first place — she was appointed by Governor Ducey, as she took over John McCain’s Senate seat after he passed. She had run for the other Senate seat, but lost.
Trump is visiting Arizona today, as McSally’s seat is an important one for Republicans to keep, if they plan to hold onto the Senate in the upcoming election. I mention all of this because it might give a better sense of at least part of her motivation for introducing this bill.
McSally notes that in the state of Arizona, travel and tourism account for more than $3 billion in tax receipts, and employs more than 180,000 people. As a result of the current downturn, this sector is experiencing an unemployment rate of over 35%.
As McSally explains:
“The tourism and hospitality industries were among the hardest hit sectors across the country and their revival is critical to our economic recovery. Arizona has lost billions in revenue this year alone due to the pandemic. My legislation will help boost domestic travel and jumpstart the comeback of our hotels, entertainment sectors, local tourism agencies, and the thousands of businesses that make Arizona one of the best places in the world to visit. It will also encourage Americans to safely get out of their homes and discover or rediscover Arizona along with the rest of the amazing destinations our country has to offer after a difficult several months stuck inside. I look forward to working with both sides of the aisle in the Senate and House to restart an important part of the economy by passing this bill.”
How would this travel stimulus bill work?
How would the American TRIP Act work?
- This would provide a $4,000 travel tax credit to individuals, an $8,000 travel tax credit to joint filers, and an additional $500 tax travel credit for each dependent child
- This could be used for travel through December 31, 2021
- This credit could be applied to all travel within the United States and its territories, so long as the travel and expenses and final destination are 50 miles from the principal residence of the filers
- Qualifying expenses include lodging, travel, and entertainment
- For filers who own a second home, expenses related to live entertainment, food and beverage, and transportation qualify, but expenses related to the dwelling would not qualify
- This would also provide $50 million to DMOs to promote travel and tourism across the nation
When the concept was first floated by Trump, the idea was that the credit would apply towards half of your eligible travel expenses. With the way this bill was introduced, it would apply towards your entire travel purchase.
My take on the American TRIP Act
I love the idea of my household getting $8,000 in free travel. And then I remembered it’s not “free,” but rather we’re all paying for this, should it pass.
While the travel industry definitely needs some support, what’s the right way to go about that?
- Is it better to give a stimulus to consumers in order to be able to travel, rather than another bailout of the travel industry, worth tens of billions of dollars?
- The future of jobs in tourism is a real concern, as millions of Americans rely on these jobs to make a living, and if they don’t recover eventually, a lot of businesses may have no choice but to shut down
- I would assume there’s some multiplier effect here, given the economic cost of airlines, hotels, and other tourist attractions shutting down
All that being said:
- I think it’s too soon to so directly incentivize Americans to travel on such a widespread basis, especially as coronavirus cases increase in so many states
- A majority of Americans not traveling say they’re not traveling because they can’t afford to; for many Americans, a tax credit doesn’t really help with that, unless people are supposed to go into debt/take out a loan/finance the purchase with their credit card until they receive the tax benefit of it
- We’re talking about an absolutely massive credit here; Americans received stimulus checks of up to $1,200, but here we’re looking at a tax credit that’s more than three times as much
The American TRIP Act has now been introduced, which would give individuals up to a $4,000 tax credit for travel. While “free” travel sounds great, I’m not sure this is the best way for the government to be spending money right now.
What do you make of the American TRIP Act?