Portland Mulls Rental Car Tax Hike

Published August 1, 2009

Multnomah County, Oregon, which includes the city of Portland, might raise its rental car tax from 12.5 to 17 percent, a move opponents say could hurt the city’s tourism industry and other businesses and residents.

“It seems unfair to tax only one small slice of business,” said Deborah Hall Wakefield, vice president of communications and public relations for Travel Portland, which promotes area tourism.

“The increase is probably shortsighted. It would put us at the top of the list of cities with the highest taxes on rental cars,” Wakefield said. “We have always marketed Portland as an affordable city for meetings and conventions. Our costs for most things are lower than in other large cities. We don’t have any sales tax. But increasing the sales tax on rental vehicles so much is a little disingenuous. Having the highest taxes on rental cars would make it tough to continue to market Portland as an affordable meeting destination.”

Last year the National Business Travel Association (NBTA) supported a federal measure to prohibit future discriminatory car rental excise taxes, but the legislation wasn’t approved.

‘Economy Hurt in Two Ways’

“Politicians have come to see the pockets of car rental customers as ‘magic pots of gold’ they can reach into any time there is a stadium, arts center, or other unrelated project to fund,” said NBTA Executive Director Bill Connors. “Their actions are the result of a myth that they won’t hurt anybody but a few onetime visitors.

“The reality is this: By unfairly targeting one group of consumers, these taxes hurt local economies in two ways. First, for those visitors who do rent cars, the taxes make a city or county less attractive as a repeat destination. Second, they create a hidden tax on local citizens and businesses who make up a significant portion of the car rental customer base,” Connors added.

Locals Make Most Rentals

Grover Norquist, president of Americans for Tax Reform, emphasized those points in a May letter to the county’s Board of Commissioners.

“What policymakers who support rental car tax increases ignore is that the majority of car rentals are actually made by local residents and companies,” Norquist wrote. “High rental car taxes—especially one set at 17 percent—prompt visitors to offset increased costs by spending less on meals, entertainment, or accommodations. Additionally, car rental demand or the length of rentals will decline due to tourists opting to stay in downtown Portland and walk or take other forms of transportation.”

Norquist added, “Residents and businesses often seek rentals in surrounding counties with lower tax rates, while there will be little to no demand from those living in or operating a company in surrounding counties to rent cars in Multnomah County. As such, this proposed tax increase will result in reduced demand for rental cars and likely not raise the estimated $4.7 million in new revenue for the county.”

Phil Britt ([email protected]) writes from South Holland, Illinois.