In a study commissioned by Enterprise Rent-A-Car and released by the National Business Travel Association (NBTA) on July 17, economists William G. Gale of The Brookings Institution and Kim Rueben of the Urban Institute contend car rental excise taxes are “inconsistent with basic principles of good taxation.”
“Although local governments may need to raise revenue, they should still seek to raise revenue in the most equitable and efficient manner possible,” Gale and Rueben wrote. “Stacking extra taxes on car rental customers is unjustified by almost any criteria.”
“The dramatic increase in car rental excise taxes in 38 states goes above and beyond the usual sales tax,” said Gale. “There is a better alternative.”
Rental Tax Cuts Business
In an interview for this article, Rueben cited an analysis of 900,000 rentals at 49 Enterprise Rent-A-Car branches in Kansas and Missouri that revealed car rental behavior changed after a tax increase on local Kansas City car rentals.
“The tax had a real bad effect, lowering auto rentals per month by 9 percent in the impacted localities,” Rueben said.
“This study supports NBTA’s position that excessive excise taxes on rental cars have a negative impact on American businesses, consumers, and local economies,” said Bill Connors, executive director and chief operating officer of the NBTA.
“Car renters have been hit with more than $3 billion worth of these taxes,” Connors said. “The projects funded by these users either have nothing to do with renting a car or benefit a broad base of additional constituents who are not taxed accordingly. We hope cities and counties can find funding solutions for major projects that don’t damage the local economy or unfairly discriminate against select consumers or businesses.”
— John W. Skorburg
For more information …
The July 2006 report, “Taken for a Ride: Economic Effects of Car Rental Excise Taxes,” is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to http://www.heartland.org, click on the PolicyBot™ button, and search for document #19712.
National Business Travel Association, http://www.nbta.org