Transportation Discrimination: Local Taxes Target Car Rentals

Posted by Mattie Duppler on Wednesday, February 9th, 2011, 10:51 AM PERMALINK

Transportation is going to be a big issue in the 112th Congress - the first action taken by the Senate this year was on the FAA Reauthorization, and yesterday the Senate Finance Committee marked up the Airport and Airway Trust Fund Reauthorization Act. The Vice President's announcement yesterday that the government will continue to pour tax dollars into the high-speed rail black hole, coupled with the President's persistent calls for more "investment" in infrastructure ensures this year will be a banner one for transportation.

With the debate revolving around how much the government spends on transportation, and what, if anything, taxpayers get in return, this provides a good opportunity to simplify and eradicate the discriminatory tax regimes that have evolved in municipalities. Most recently, car rental companies have been subjected to unfair and excessive taxation to fund extraneous spending in localities. A relatively new revenue raiser - the first car tax was enacted in 1976 - 43 states and the District of Columbia subject car renters to this tax under the faulty assumption that it targets travelers and not their voting constituencies.

While this is false - research shows that over half of car rental customers are local residents - what's worse is this tax in an aberration in transportation funding schemas; the revenue raised is used to fund special public projects, such as sports stadiums, which can hardly be considered germane concerns for the car rental industry. Moreover, auto rental companies are unique victims of unfair municipal and local tax regimes - other enterprises in the transportation industry, such as railroads and airlines, are granted federal protection from such discriminatory taxation.

Last Congress, Americans for Tax Reform supported efforts to end this unfair taxation by encouraging Congress to pass the End Discriminatory State Taxes on Automobile Renters Act. The transportation-heavy focus in the new Congress provides the perfect opportunity for lawmakers to end the institutional discrimination against car rental companies and members concerned with this overreach by local governments should swiftly reintroduce and support this bill in the 112th.