Trump Administration Considers Travel Tax Credit

Filed Under: Travel

Update: A Senate bill has now been introduced that would offer a tax credit for travel (follow the American TRIP Act on congress.gov).

Obviously the tourism industry is struggling right now, and that puts hundreds of millions of jobs globally at risk. That’s a big problem, but is there a solution? Well, the Trump Administration is reportedly considering at least one option to boost domestic travel.

“Explore America” $4,000 tax credit for travel

The Trump Administration has apparently floated the concept of an “Explore America” tax credit, which Americans could use for domestic travel. Here’s how this could work:

  • This credit would be capped at $4,000 per household
  • This credit would apply for travel expenses through the end of 2021
  • This credit could be worth up to 50% of a household’s spending on expenses like airfare, hotels, rental cars, attraction tickets, and restaurant dining, when at least 50 miles away from home

This concept was first brought up during a roundtable with restaurant executives back in May. President Trump hasn’t said much publicly about this concept since, though the U.S. Travel Association is now lobbying Congress and the Trump Administration for this to come to fruition.

The lobbying group argues that this is modeled after the tax credit that was available for first time home buyers between 2007 and 2009.

Could a travel tax credit be a good idea?

I can see arguments for and against this concept.

There’s a lot working against this concept:

  • Ultimately this tax credit will be coming out of taxpayers’ pockets, so is this really how taxpayers’ money should be spent at this point?
  • Is it reckless to directly incentivize Americans to travel, especially as coronavirus cases are on the rise in about 40% of states? I’m on my first trip in months and am not sure I want to travel again anytime soon (more on that later), but is creating a direct incentive like this a smart idea?

But there is also some merit to this concept, or at least it’s not completely negative:

  • Is this a better concept than just outright giving airlines and hotels another bailout worth tens of billions of dollars, which gets taxpayers (other than airline employees) virtually nothing?
  • The future of jobs in tourism is a very 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.

Bottom line

It doesn’t sound like the “Explore America” tax credit is anywhere close to being finalized, but it’s an interesting concept.

I do think it’s too early to directly incentivize people to travel in this way, though as such this does seem like a better concept than another travel industry bailout worth tens of billions of dollars. Maybe something like this could make sense if or when things stabilize a bit more otherwise?

It certainly seems like a better idea than Trump suggesting the government would buy years of bulk discounted airline tickets.

What do you make of this concept?

(Tip of the hat to View from the Wing)

Comments
  1. As much as I would personally benefit, this is not good policy on balance.

    1) It benefits people with the time (i.e. paid vacation time) and wherewithal to travel, i.e., disproportionately middle, upper middle and wealthy people who would and could travel anyway.

    2) As a corollary to the above, it’s a tax credit, which means that it only benefits people who can afford to spend now and get it back when they file next year; and, unless it is a refundable credit, again, only benefits people who can spend $8,000 _and_ who have $4,000 in federal income tax liability.

    3) why should we incentivize travel and not, say, spending on education or tools for trades or hobbies or home energy efficiency investment or electric cars or literally anything else you can think of that is a reinvestment in society, vs. entertainment.

    4) why would we incentivize travel _during a pandemic_?

    5) if you pay with points, no tax credit.

  2. Until the (increased)taxman cometh, sign me up. I figure $4k is good for a night or two at the Amangiri in Utah.

  3. Many states are being forced to make cuts to their education systems and other social service programs and public services. Not to mention we are in the middle of a pandemic where the virus is rapidly spreading in certain parts of the country. Seems like the last thing we want to do is give people there money to encourage them to travel around the country spreading the virus and risking another complete economic shutdown. Something like this might be able to be considered once the virus is under control, but for right now it would encourage the exact opposite of the behavior the medical community would want to encourage.

  4. Not a bad idea but there is not going to be another round of stimulus so chances of this happening are essentially zero. Still better than a bailout though.

  5. While I like the idea of getting $4000 … I’ll spend much more than that next year …. that’s not where the money needs to go.

  6. Of all his bad ideas and there are many, this one is the least bad.

    But it doesnt make it good, or at least fair. It does help the travel industry which is a plus. It also helps people who can afford to travel and wait for the money back which is great for some, but many more cant afford to travel at all and they wont a thing.

    How about 4000 credit for grocery purchases instead so everyone can benefit? Or 4k credit for medical bills or insurance?

  7. Any Taxpayer money that isn’t urgently needed anywhere else at the moment should be pumped into vaccine efforts and potential COVID treatment drugs. The industry will not fully recover until the virus is stopped, not before.

  8. Better than a free bailout of airlines/hotels, I guess.. at least this puts money to those companies that people think worth saving, not who’s CEO whines the loudest..

  9. If the government is incompetent enough to pay for half my stay at the Fogo Island Inn, I will take it. But this is not where our tax dollars should be going.

  10. Putting aside that it would mostly benefit the well-to do and would encourage travel when that is still not a good thing, it would probably not stimulate very much, as many of those who would get the benefit will probably be those who are already planning travel anyway.

  11. One comment – I disagree with all of the comments that are saying “this is not the time for travel,” or we shouldn’t “incentivize people to travel.”

    1) That is a slippery slope – even states like New York, Connecticut, and Los Angeles are now encouraging people to dine out (by allowing the establishments to open). Is that too soon?
    2) Travel and related industries are a significant portion of the economy. Either you directly support those businesses and employees through more direct aid, or you encourage/let people patronize the businesses

    Travel will happen whether you like it or not – it should be made as safe as possible. Given the importance of the industry, some support (including potentially this credit) is warranted.

  12. Makes sense only for travel, hotels and rental cars. AND ONLY AFTER WE HAVE VACCINE AND PERSON FILING CAN PROVE TRAVELERS VACCINATED.

  13. @Anthony

    Just remember , even once it becomes ok to travel again you will still have the never Trump lunatics to deal with.

  14. The tax credit is the stupidest idea yet. There are people who cannot pay their rent and are losing their businesses unrelated to the tourism industry. I would follow the paper trail of whose idea this was and I guarantee it is tied to donors.

  15. It sounds good on the surface, but the 2 issues that bother me the most are that it would inevitably end up subsidizing corporate travel that doesn’t need to milk off a tax credit and lower income Americans would not really benefit from and travel credit. They need other assistance and likely wouldn’t have any money to travel.

  16. These kind of incentives would be a good idea if they encompass most if not all the non-essential industries affected by the pandemic, if there was an effective way to contain outbreaks. (Eradication through contact tracking or a vaccine)

    Unfortunately it’s just plain reckless encouraging non-essential travel before we can even properly roll any of these options out.

    I go to college near a California beach town south of Big Sur that’s popular with visitors from the Central Valley. Ever since my county lifted their restrictions, they have been encouraging people to not visit from out of town, but unfortunately those warnings have been widely ignored.

    Seriously though, it’s the summer of the staycation. They’ve got the Sierras in their backyard, we’ve got the beach and let’s keep them all for ourselves this summer.

  17. Hello All,

    I thought reading through everyone’s comments that someone would point out the glaring obvious…TRUMP OWNS HOTELS, RESORTS AND GOLF COURSES…who and the heck is he trying to help here??? It isn’t the traveler, it’s is looting and grifting family…of course this is my opinion and I could be wrong

  18. Hello All,

    I thought reading through everyone’s comments that someone would point out the glaring obvious…TRUMP OWNS HOTELS, RESORTS AND GOLF COURSES…who and the heck is he trying to help here??? It isn’t the traveler, it’s his looting and grifting family…of course this is my opinion and I could be wrong

  19. While @Asdf really nailed everything, some comments are still confused of the objective of the tax credit. As only few comments understand, It is to help the travel industry not helping low income people. This is to make sure the travel industry earn it rather than handing bailouts directly.

    Again this has little to do with us taxpayers and more to do with the travel industry.

  20. I would welcome this.

    But the up to 50% of a household’s expenses is misleading and confusing. Is that based on households spend 8K a year?

    People who are so uncomfortable as to shame their fellow passengers for wearing or not wearing a mask, clearly are not ready to travel, and should stay at home or travel by car.

  21. @ASDF @Bill

    A tax credit for travel will heavily benefit industries that are the hardest hit by government ordered shutdowns. Countless jobs will be lost unless travel starts up on a big scale. These industries provide a lot of tax revenue to local and state governments. The workers in a lot of these industries certainly benefit from middle class people spending money. So far, most government positions have been shielded from coronavirus. This includes public school teachers. They have been getting paid and earning pension credits through the shutdown. Throwing more money at an already inflated education system is not going to do much good. The people hardest hit by the shutdowns are in the travel industry. College is already exorbitant and throwing more money at it isn’t going to solve any problems. Training programs for trades sound nice, but jobs don’t get created out of thin air. It’s based on demand.

    One way or the other, tax payers will pay for people out of work (unemployment will have to be expanded). It’s better that tax credits encourage middle class people to spend more of their money which provide jobs instead of government footing 100% of the bill for the unemployment benefits.

    This credit does not suggest people go on vacation or go to tourist sites right now. But 4 months is a long time away. 2021 is a long time away. It will be safe enough to travel, eventually.

    @Arie

    People already spend money on groceries. A $4000 tax credit on groceries isn’t going to bring more jobs to the economy. A credit on travel will get people to spend more money than they otherwise would.

  22. I say go for it! I’ve gotten so much free money this year during the pandemic, I don’t know how to spend it. I’m swimming in PPP cash like Uncle Scrooge. Would love to get 50% off an 8k vacation sometime next year – especially after I get my vaccine. Long live president trump!

  23. “even states like New York, Connecticut, and Los Angeles are now encouraging people to dine out (by allowing the establishments to open). Is that too soon?” – as someone who actually is in NYC I’m going to stop you right there. Restaurants here only have takeout available. If we move to the next phase next week it will only allow outdoor dining. Los Angeles caps the capacity of their dining rooms. I’m not aware of any of these places ‘encouraging’ people to dine out. There is no tax credit to eat out at a restaurant. The mayor and governor aren’t out there telling people to go to a restaurant to eat. In addition to that there is a vast difference between allowing restaurants to have outdoor seating which will have mostly residents eating at these places vs encouraging people to travel all over the country. NY has the lowest transmission rate of the virus in the entire country. The last thing they want are tourists from Florida, Texas, Arizona and all the other states that have failed to keep the virus in check. In fact there is talk about for people coming from those states into NY being subject to a two week quarantine.

  24. @Rav Let me fix your statement for you: people who are soo self-centered, selfish and uneducated that they can’t be bothered to wear a mask when in public in spite of the scientific evidence that masks work shouldn’t be allowed out of their home.

  25. Bill – NYC restaurants have already begun to put outdoor seating out (I know as I have eaten a meal or two at them already in recent weeks), and many more are reopening next week. Also, mask wearing is required, which is essential. The mayor and others agree that restaurants are essential to the city, and is encouraging them to apply for more outdoor seating ahead of reopening next week.

    My overall point is that many people would say even a limit reopening of outdoor restaurants is too risky, but states are doing it. Why? Because people like these activities, and they provide jobs. The same principles should be applied to travel. Open it up, even encourage it. However, do it safely – first, by requiring masks on airplanes.

  26. @asdf

    There is no reason not to encourage travel during this pandemic. We are going for herd immunity at this point.

    ~ The Honorable Reginald

  27. @Lucky I’m happy to come and explore america if I only was allowed entry again. (due to Covid-19 to be clear on this)

  28. I would like to go to Hawaii or Vermont next month but right now they don’t want tourists anyway. So not sure if we have a demand problem or a supply problem. Maybe post vaccine this would work though.

  29. Awful idea. The pandemic (by case #s) is worse now than during the panic in March-April. Encouraging people to travel now is bad public health policy, period. Like others have said, this also disproportionately benefits wealthier people who have time and available funds for travel. We would be incentivizing behaviors that 2 months ago we were told put people’s lives at risk!

    This propping up of big travel businesses needs to end. They’ve been fleecing us for years and threw their money away in search of higher stock values, so now taxpayers must bail them out again. Also, this idea was floated by “restaurant executives”, which leads be to believe big food is behind this. Should we be propping up the awful chain restaurants that would presumably get most of the business from this credit? I’d be fine if most chain restaurants went OOB.

    If you want people to spend money, just give them money. People will spend on what they think they need, which will help the economy better than covering half the cost of Uncle Bill’s trip to see the grand Canyon.

  30. Half off would get me to travel, but won’t hotels raise prices if the government is paying for half?

  31. Socialism is bad until Bubba gets half of his money back for driving his family to Orlando and Branson.

  32. If we assume 1 million households max out this credit, that’s a cost of $4B. That’s a drop in the bucket for the US budget. For scale, it’s about 20% of federal spending on agriculture subsidies in 2019. The government can (and should!) deficit spend during recessions to create fiscal stimulus. This money would not be taking away from other programs, it would be increasing the debt. It’s probably the best idea I’ve heard as far as helping out the travel industry.

    (governments are supposed to rein in the spending during expansions to make deficit spending during a downturn less risky, which the US has totally failed to do in the past few years. So yeah, it sucks that we have to grow the debt so much, but it’s still better than the alternative, which would be a prolonged economic downturn with a weak eventual recovery)

  33. Interesting policy idea and a good discussion in the comments here about pros and cons. I’m not sure if this is the best approach, but I prefer it to some other policies being discussed (such as an extension of the federal unemployment benefit that expires in July).

    A general observation about the inertia of these shutdowns and travel bans. It took some effort to bring things to a halt, and now it looks like it will take some outside effort to get things moving (and people traveling) again. So a policy like a travel tax credit (or something) designed to spur people to start venturing out again may be important to help get things moving in the right direction again.

  34. Well…if people are going to travel frivolously and then alternate between a panic-attack and passenger-shaming, they shouldn’t be rewarded for doing so.
    Leave it to sturdier souls. If there’s a tax write-off for travel, they already know about it.

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