No Joke: US Export Promotion Effort Funded by... Taxing Exports

The Office of Senator Jim DeMint has done some worthwhile digging into the Obama administration's new US tourism promotion effort, "Brand USA," and what they've uncovered is actually more ridiculous than you'd expect.  The report's goal is to show that the new export promotion program - remember: domestic tourism is actually an "export" because foreign dollars are spent here on US goods and services - is rife with cronyism, over-spending and general mismanagement.  (The lede: "High-powered executives are enjoying luxury accommodations all over the world, all in the name of promoting tourism for the U.S. government." Yikes.)

Now, this news is certainly not good for US taxpayers, but let's face it: this type of stuff is unfortunately pretty commonplace in government and we're not talking about a lot of money here.  On the other hand, it's this seemingly-innocuous passage that caught my attention:

Established through the 2010 Travel Promotion Act, Brand USA is eligible to receive up to $100 million annually generated through new taxes paid by foreign travelers.

I freely admit that prior to today I had only a vague recollection that this Act - passed during the halcyon days of total Democrat control of the White House and Congress - even existed.  A little Googling reveals a snazzy Brand USA website and the text of the Travel Promotion Act, which was included as Section 9 in another bill reauthorizing the Capitol Police (no joke) and provides in subsection (d) for the establishment of a "Travel Promotion Fund" and then in subsection (e) for a "Travel Promotion Fund Fee."  The good folks at Global Trade Alert have summarized that fee as follows:

The law institutes a new fee of $10 or more on visitors traveling to the United States from the 35 countries that participate in the Visa Waiver Program (VWP) . This new tax is supposed to raise an estimated $200 million per year, which will be used to help fund a new “Corporation for Travel Promotion.” The purpose of this new corporation is to promote tourism to the United States.

The bill developed from the “Travel Promotion Act of 2009” (S.1023 as originally introduced...), a bill that would establish a program for the promotion of travel to the United States, and provide for two separate means of funding this program. One would be a fee of at least $10 on each traveler from certain countries that enter the United States, and the other an unspecified set of assessments on the travel industry in the United States. These fees might be inconsistent with the national-treatment principle of GATT Article III and (perhaps more appropriately) GATS Article XVII.

I'm certainly not going to get into the trade law weeds regarding the WTO-consistency of the Travel Promotion Fund Fees (although that is an interesting issue).  Instead, I just want to clarify that this is an actual US law that is designed to promote tourism exports by imposing a new tax on - and thus discouraging - tourism exports.

Seriously.

Now, I'm no mercantilist, but even I can see that if you want to encourage exports it's probably not a good idea to - you know - tax them.  (Then again, this is the same US government that imposed new taxes on imports in order to fund trade-liberalizing free trade agreements, so maybe they're just being consistent.)

This export promotion law becomes an even worse idea when we learn, as Senator DeMint's office helpfully informs us, that a good portion of these export taxes aren't even funding tourism exports but instead are helping, among other things, "CEOs from some of the nation’s most successful hotels and resorts... to book top-of-the-line venues to entertain other members of the travel industry."

So, really, we have an export tax that's bizarrely intended to promote exports but really just promotes the lavish expenditures of certain big exporters and, of course, the generous and helpful bureaucrats facilitating those expenditures.

You simply cannot make this stuff up.

(h/t Ben Domenech)