The taxpayer-advocacy group Americans for Tax Reform (ATR) has estimated average prices and taxes imposed on 13 popular targets for multiple layers of hidden taxes. “Sin” taxes, telecommunications taxes, and taxes on tourists are included in the analysis.
While most of these goods and services are subject to specific excise taxes and other charges, the tax “bite” also includes the cost of sales taxes, corporate income taxes, payroll taxes, property taxes, capital gains taxes, unemployment insurance taxes, worker’s compensation taxes, and other payments businesses must make to federal, state, and local governments.
Here is the ATR “Tax Bites” analysis of car rentals.
Estimated Average Cost: $52.71/rental
Estimated Tax Bite Percentage: 60.6 percent
Estimated Tax Bite Per Unit: $31.94
As part of the trend toward exporting state and local tax burdens, car rental taxes are increasingly popular with lawmakers who would prefer not to tax more heavily their voting constituents.
Although studies have shown more than half of car rentals are by local consumers, the notion that taxing rental cars means taxing tourists is pervasive on the state and local level. The number of car rental excise taxes has nearly doubled in the past decade, with such taxes in 99 localities in 42 states and Washington, DC.
Local excise taxes and other charges imposed by states and municipalities now add 26 percent, or $13.70, to the average $52.71 rental car bill. And this doesn’t constitute the full tax burden included in the cost of renting a car. Taking into account federal and state income taxes, federal payroll taxes, sales taxes, unemployment insurance taxes, worker’s compensation taxes, business license taxes and fees, utility taxes, local property taxes, and local income taxes, the total tax bite rises to 60.6 percent of the bill.
All told, regardless of whether you are a tourist or a resident, renting that car for $52.71 will cost you $31.94 in taxes and fees.
