While much attention has been paid to Gov. Brewer’s sales tax increase and the Phoenix food tax, Arizona taxpayers should keep an eye on legislation (HB 2736) currently moving through the Arizona House that would raise the already high rental car tax in Maricopa County and impose a new tax on ticket sales for all Cactus League spring training tickets sold in Maricopa County. Funds from these tax increases would be used to keep the Chicago Cubs in Mesa. While this is certainly a desirable goal, raising the rental car tax, or any tax for that matter, is the wrong way to go about it.
Considerable costs are already heaped upon car rentals at Phoenix Sky Harbor Airport with the five taxes and fees that are currently applied. For example, these taxes and fees already add over 38% to the four day rental base price for a midsize SUV. Also keep in mind that the 18% sales tax hike that will be on the ballot in the May already threatens to substantially jack up the cost of renting a car.
While proponents of this tax hike may claim that this bill mainly affects out of state visitors, that is most certainly not the case. Arizonans renting replacement vehicles would be subject to this tax increase. Given the fact that replacement vehicles represent the majority of the car rental business, this tax increase would be paid mostly by Arizona residents.
HB 2736 would also have a negative economic impact on the local economy. One study shows that a recent localized rental car tax hike led to a 9% reduction in car rentals and as much as an 86% reduction in the number of days cars were rented. Likewise, HB 2736 will lead to reduced demand for rental cars and likely not meet revenue projections.
Additionally, the Goldwater Institute has pointed out that raising taxes to benefit a single sports franchise, as HB 2736 would do, may very well violate the Arizona constitution. Furthermore, Goldwater Institute also points out that this bill would grant a sports authority a level of power that may constitute an improper delegation of legislative authority.
ATR is asking lawmakers to reject HB 2736, which is simply bad policy and worse, violates the Taxpayer Protection Pledge. Five Pledge signers are listed among the bill’s sponsors. ATR urges those lawmakers (Sen. Verschoor and Reps. Adams, Nichols, Tobin, and Yarborough) to reconsider their support.