It's high time the federal government took some steps to prevent state legislators – in their mad dash for cash – from treating the car-rental operations as an omnipresent cash cow by unfairly yoking them indiscriminately with taxes that, more often than not, are diverted to pay for non-related items.
Such was the call to action issued by National Business Travel Association (NBTA) executive director and COO Michael McCormick in support of H.R. 4175 (the “End Discriminatory State Taxes for Automobile Renters Act of 2009”) at a hearing before the U.S. House of Representatives Judiciary Subcommittee on Commercial and Administrative Law.
What's more, the NBTA wasn't alone in decrying the undue burden such practices place on car-rental businesses, their customers and the overall travel arena as representatives from several other major industry organizations, including the American Society of Travel Agents (ASTA) and the American Car Rental Association (ACRA), stood up to be counted in support of the bill's passage as well.
In the course of his testimony, McCormick stated the association “recognizes that an effective transportation system requires sufficient funding from taxes [but] believes taxes and fees on the industry should be: proportionate to the cost of travel; applied consistently across the country; and re-invested to improve and maintain travel infrastructure and not diverted to non-travel spending.”
The NBTA executive director went on to note the heaping of additional taxes on travelers, combined with the earmarking of such monies collected to fund non-travel-related endeavors, “hurts not only the business travelers and their companies, but also the overall economy and especially the U.S. travel industry, which is just now seeing business travel begin to increase (back) to pre-stock crash levels.”
“While many types of taxes are increasing, the most outrageous and least fair are those being imposed on rental cars. Currently, there are at least 118 car-rental excise taxes in 43 states and the District of Columbia,” he noted. “Wary of increasing taxes on the general public, politicians have turned to enacting excise taxes on rental-car customers; the premise being [such taxes are] an easy way to raise funds without raising taxes on voters or local businesses.”
However, he said, “as of 2004, car-rentals at [locations] away from airports comprise the majority of the U.S. rental-car market, [and] the vast majority of customers at these locations are locals, not visitors.”
Echoing testimony by the NBTA were similar sentiments voiced by ASTA chair/president Chris Russo, who reported the organization “has consistently expressed alarm at the trend of taxing jurisdictions levying discriminatory car-rental taxes. Left unchecked by Congress, this practice has grown to staggering levels as states and localities have seen out-of-state consumers as an easy, low-risk source of funding special projects such as sports arenas, cultural attractions and other municipal improvements.”
According to Russo, “the proliferation of discriminatory car-rental taxes threatens to have a widespread suppressive effect on the demand for travel services… particularly during times of economic distress such as the current recession.” He added: “New and discriminatory taxes serve as a disincentive to the economic recovery that could result from increased travel.”
NBTA's director for public policy Shane Downey stated, “It's not surprising that taxes on car-rentals have doubled over the course of the past decade. It's become an all-too-common practice for lawmakers to view this [transaction] as a veritable pot of gold.”
Even closer to the problem is Bob Barton, ACRA president as well as president and COO of U-Save Auto Rental. “We're well aware that governments are under intense pressure to raise revenue these days,” he said, “but it's certainly not meant to be the responsibility and burden of tourists to fund non-travel-specific activities and projects.”
Elaborating on non-specific projects, Barton cited as examples: Charleston, SC's proposal of additional car-rental taxation as a means to fund a marketing campaign designed to persuade Southwest to fly into that city… “with no one on hand to defend the car-rental industry's interests;” as well as an aborted attempt at Sky Harbor International Airport in Phoenix, AZ to similarly raise money via car-rental taxes in order to fund the construction of a new spring-training stadium for (baseball's) Chicago Cubs.
“We're determined to put an end to this practice [of indiscriminately taxing car-rentals for myriad non-industry-specific purposes],” Barton pledged, “not just because we feel it violates interstate commerce statutes but because we believe there must be proportionate sharing [of the pain wrought by taxation].”
Summing up, ASTA's Russo contended: “By extending to rental cars the same protection that Congress has already applied to railroads, buses and passenger airlines, H.R. 4175 would serve to halt this trend before it can act as a further drag on economic recovery.”