U.S.-Mexico Tourism and Taxes in the Media

Tourism is an underestimated economic driver for the U.S. and Mexico that tends to be taken for granted somewhat in the broader binational discussion. Two recent media reports highlight its importance. Associated Press reporter Elliot Spagat recently sought to draw out potential impacts to border communities from the Mexican government’s doing away with the preferential tax status of the border zone. On January 1, the federal value added tax was raised to the standard 16% after a decades-long policy of a reduced 11% rate in Mexico’s border region. As Spagat concludes, this is essentially an added incentive for Mexican crossborder shoppers to make their purchases in San Diego, El Paso, Tucson, Brownsville and other U.S. border communities rather than at retailers on the Mexican side of the border (retailers in the U.S. often have other advantages, including intense competition, generous return policies, and greater variety, particularly in apparel and electronics). Spagat quotes statistics from the University of Arizona’s widely cited 2008 study on the economic impact of Mexican visitors to Arizona; as the report notes, just over 48% of sales tax revenue in Santa Cruz County in southern Arizona are generated from sales to crossborder Mexican shoppers. This is a remarkable level of dependence on retail sales to Mexican consumers; some in southern Arizona believe that the real figure is even higher. As the Arizona Republic recently pointed out, policymakers at the local level throughout Arizona have become so interested in the potential economic value of Mexican shoppers that the Maricopa Association of Governments is spearheading an effort to include the entire state within the “border zone” (which currently extends 75 miles north of the border).

We have pointed out the importance of Mexican tourists to the U.S. economy at various times, including our March 2012 study, “Realizing the Full Value of Tourism from Mexico to the United States,” which we presented at an interagency meeting at the White House on travel and tourism to the United States. With the complete numbers for 2012 finally out, Mexico again tops the list of destinations for U.S. tourists, as the Los Angeles Times pointed out on January 1 in an article featuring the latest statistics on the issue from the U.S. Department of Commerce’s Office of Travel and Tourism Industries. Although the numbers of U.S. tourists to Mexico slipped somewhat in 2011 and 2012, Mexico still stands at the top of the list, ahead of Canada by a good eight million trips annually.