Expert Sees Problems with Drink, Rental Car Taxes

Published September 1, 2008

“Any time you raise the price of something, you decrease its consumption.”

So says Frank Gamrat, an economist and senior research associate at the Allegheny Institute in Pittsburgh.

Gamrat said he believes Allegheny County officials who supported a 10 percent tax on alcoholic drinks and a $2 tax on car rentals “tried to minimize opposition by hitting items that are narrowly based. If you don’t buy a drink or rent a car, you don’t care.

“But we have a lot of mom and pop bars in this town,” Gamrat said. “You’re talking about a lot of people whose business will be affected. I don’t think the county expected this level of organization and opposition.”

Money Pulled from Economy

The taxes will take more money out of the local economy at an especially bad time, Gamrat said.

“You’re talking about delicate economic times at best right now,” Gamrat noted. “The county executive [who led the fight for the new taxes] is encouraging those who live on the county fringes to buy elsewhere, and other people to spend less.”

Collections Ahead of Schedule

The tax collections so far have come in greater than projected. Gamrat said this is because “even though bar owners are seeing drops in business, banquet hall owners are not. There are still lots of weddings, graduations, and other events where drinks are served.”

Gamrat said the car rental tax is “just as egregious” as the drink tax but has not stirred much opposition because there are only a handful of car rental firms in the area.

“[County officials] think it’s going to be paid by outsiders, but that’s wrong,” Gamrat said. “The majority of renters are county residents renting locally” because their regular car has broken down or they have some other reason to need a car for short-term transportation.

Steve Stanek