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In the News

  • The Advocate: Letters: Car rental taxes are unfair, regressive

    By Sally Greenberg

    To help plug a $2 billion state budget deficit, Gov. John Bel Edwards has proposed sweeping tax hikes that are on a fast track to the Legislature, some of which are distinctly unfair — particularly car rental and car sharing tax hikes.

    The National Consumers League has been advocating against the expansion of rental car taxes for over a decade, and now, car sharing taxes.

    An analysis of auto renters finds that households earning less than $100,000 annually pay half of all car rental excise taxes, making this a regressive tax. Working families earning less than $50,000 annually pay 19 percent. And 7 percent of car rental excise taxpayers earn less than $25,000 annually.

    Basic car rental and car-sharing fees are typically reasonable, but the layers of tax and user fees build up.

    In a study on the economic effects of car rental excise taxes, William G. Gale, Ph.D., of the Brookings Institution, and the Urban Institute’s Kim Rueben, Ph.D., concluded, “Although local governments may need to raise revenue, they should still seek to raise revenue in the most equitable and efficient manner possible. For a variety of reasons, stacking extra taxes on car rental customers is unjustified by almost any criteria.”

    Make no mistake — this tax is not a “visitor tax.” Consumers who can afford it the least will feel it the most. Lawmakers should pause and ensure the most equitable path to fiscal solvency and not place an unfair burden on those who can least afford it.

    Sally Greenberg is executive director of the National Consumers League.

  • Atlanta Journal Constitution: Local Consumers Take Rental Tax Hit

    By Sally Greenberg

    We all agree that we need to fix our roads and infrastructure, but before the Georgia legislature tacks a $5 flat fee across the board on rental vehicles, there are a few things they should know. Shifting the burden from a gas tax to a user fee in the form of a rental car surcharge does nothing to ease the financial stress on Georgia’s consumers. In fact, all it does is ensure that the burden is applied less fairly and targeted at consumers who can least afford it.

    Since 1990, more than 100 rental car taxes have been enacted in 43 states and Washington, DC. In total, rental car customers have spent more than $7.5 billion to fund projects, repair roads and plug budget gaps. There’s a prevailing but erroneous belief that rental cars are driven by business travelers and tourists whose out-of-town money is seen as quick revenue fix for state transportation budgets.

    This is simply untrue. In fact, approximately 50 percent of all car rentals comes from local car rental and car-sharing drivers. These are consumers who need a reliable vehicle to travel to a job interview, or take a trip to buy groceries, or replace their car when it’s in the shop. These are often consumers who can least afford to bear the burden of these discriminatory taxes – part-time workers, single parents and retirees on fixed incomes. Given the explosion of rental car taxes, politicians clearly see these consumers as their piggy banks and endless revenue generators.

    Imagine you are renting a car from a local dealer to run a typical weekend errand. If the legislature has its way, the $5 fee they are considering will be added on top of the existing 3 percent county tax. While the underlying cost of renting the vehicle is relatively low, it is now possible that 50 percent of the total payment will go toward taxes and user fees. How much is too much? The National Consumers League (NCL) understands the role of taxation in providing critical services, but we do not support using a discriminatory tax targeted at the consumers who drive less frequently and can least afford the burden. Indeed, the NCL is part of the Curb Auto Rental Taxes (CART) campaign, a broad coalition of companies, policy organizations, and labor and consumer advocacy groups working to end excessive taxation on consumers in Georgia and across the country.

    As the legislature considers how to fund Georgia’s transportation needs, I hope they will consider a way to ease the burden on consumers, not shift it from one consumer to another.

    Sally Greenberg is executive director of the National Consumers League.

  • Wired: What Are All Those Weird Fees on Your Rental Car Receipt?

    By: Jordan Golson

    The holidays are great and all, but for those of us living across the country or around the world from our friends and relatives, slogging over long distances quickly becomes a pain. Combine dealing with travelers who have seemingly never flown before, TSA security checks, and the pain that is renting a car, it’s enough to make one stick to FaceTime video chats. Especially when you take your finances into account.

    We know airlines are making gobs of cash by charging extra for things like checked baggage and extra legroom, but take a look at your latest car rental receipt, and you’ll see you’re paying for a lot of things that aren’t related to, you know, getting a car. What, for example, is a concession recovery fee? Why does renting an Impala for three days come with a convention center surcharge? And why on Earth am I paying a daily facility charge when the whole point is that I’m taking the car out of the facility?

    It turns out all those taxes and surcharges aren’t hard to decipher ways for the rental companies to wring more cash out of you. They’re hard to decipher ways for local governments and airports to wring more cash out of you. In addition to the standard sales taxes that states and municipalities apply to all purchases, special taxes are often levied on car rentals because politicians would rather tax visitors, who can’t boot them out of office, than their own constituents, who can.

    “Politicians are reluctant to choose a sales tax,” says Sharon Faulkner, executive director of the American Car Rental Association, an industry lobbying group, because it immediately hits the wallet of all their constituents. Instead, “they try to hide it from the consumer and charge it on the car rentals.” City and state leaders “are always looking for money from whatever source they can.”

    For a nearly two-week rental from Enterprise at Boston’s Logan Airport last month, we paid six different taxes and surcharges. Here’s what we forked over cash for, and where our money went:

    Convention Center Surcharge ($10 per rental)

    All vehicle rental transactions in the City of Boston are subject to this $10 “surcharge”, meant to help pay for the construction and renovation of convention centers in five Massachusetts cities. Taxing car rentals to pay for civic projects like convention centers or stadiums is a frequent practice. “It has to do with tourism,” says Faulkner, so politicians are happy to make tourists and business travelers pay.

    Vehicle License Recovery Fee ($2 per day)

    It’s common practice to charge rental companies much higher fees to register and title their vehicles to increase revenue for motor vehicle departments. Some state legislatures allow car rental companies to pass on some of those costs directly to the customer in the form of license recovery fees.

    Parking Surcharge ($0.60 per rental), Customer Facility Charge ($6 per day), & Concession Recovery Fee (11.11 percent)

    These three are all related to the airport itself. Airports are expensive places to build and operate, particularly with huge unified car rental facilities and shuttle buses to move passengers around. To pay for those expensive services and billion-dollar buildings, airports charge car renters a wide variety of fees to cover their expenses.

    Sales Tax (6.25 percent)

    The standard sales tax on all purchases in the state.

    The charges for civic projects like convention centers and stadiums, as well as the increased licensing fees for rental cars, are particularly galling to the American Car Rental Association. It views the taxes as “discriminatory”, applied unfairly to one group of taxpayers—in this case, car rental customers. All these fees are likely to deter some folks from renting, meaning their overall profits decrease.

    To fight this trend, the major car rental agencies have formed a trade group called Curb Automobile Rental Taxes, to direct consumers’ anger toward local governments and away from the rental agencies themselves.

    “Those are the ones that we don’t have control over,” says Faulkner. “We don’t have a choice but to collect it and pay it to the appropriate county or state.” Some of the fees are set up to pay for a particular project, and legislatures promise that the fee will be eliminated when the project is completed. However, that seems to rarely happen, and the money is instead directed to a different project. New York State, for example, has an additional 6 percent state-wide “special” sales tax on the rental cars, in place since 1990, with an additional 6 percent “special supplemental” tax added in 2009 on cars rented in New York City and several surrounding counties.

    So why don’t car rental agencies roll all these fees into the cost of the car rental itself? According to Faulkner, it’s so governments can make sure they’re getting all the money to which they are entitled. “It makes it easier for the municipality to audit,” she says. “The airport has to know that you’re paying your concession fees correctly, that the rental agency is not keeping any of these funds.”

    And for those entities, car rentals are an easy target, Faulkner says. It’s, “Oh look! We can fund this, we can fund that, and they add another tax.”
    This is the biggest reason why renting a car off-site from the airport, from a neighborhood rental outlet for example, is so much cheaper than the rental desk at the airport—renters don’t have to pay all the concession and facility fees that an airport requires. But good luck getting there without a car.

    Jordan Golson is a technology and automotive reporter based in Durango, Colorado.

  • San Jose Mercury News: Federal Bill Would Stop Unfair Rental Car Taxes

    Dec. 14 Readers' Letters

    By Ken McEldowney

    In the midst of the holiday season, travelers who rent cars often experience sticker shock when they turn in the keys. In California and throughout the country, discriminatory rental car taxes have driven up prices. More than 100 U.S. cities have rental car taxes. In San Mateo County, a 2.5 percent tax is assessed for general funds, meaning whatever lawmakers like, no guarantees that it will boost tourism. A growing bipartisan coalition of like-minded organizations and lawmakers support HR 2543, the End Discriminatory State Taxes for Automobile Renters Act. EDSTAR would protect consumers by prohibiting new state or local taxes that discriminate against car renters. The bill is before the House of Representatives, and it should be passed immediately.

    Ken McEldowney is the Executive Director of Consumer Action.

  • Roll Call: Taking Out-of-State Drivers for a Ride | Commentary

    By Eben Peck

    Labor Day marks the unofficial beginning of fall with back-to-school season, cooler temperatures and, for some, the long-awaited return of football. The National Football League season kicks off on Sept. 4 in Seattle with a rematch of the infamous 2012 “Fail Mary” game between the Seahawks and the Green Bay Packers. Believe it or not, this game holds a lesson for students of transportation and tax policy — both teams are known for their superstar quarterbacks and rabid fan bases, but there is a significant difference in how they chose to finance their stadiums. Lambeau Field’s renovations were partially funded by a sales tax paid by those who benefit the most from the team and the stadium — the citizens of Green Bay, Wis. CenturyLink Field, on the other hand, was built using money collected from discriminatory taxes on car rentals paid by visitors to Seattle.

    The American Society of Travel Agents has long been concerned about the growing trend of heaping taxes on car rentals, a favorite tactic of cities and local governments looking to raise funds for building stadiums or filling holes in city budgets. This taxing strategy is popular with local politicians because it is seen as a “free lunch” — local residents get a new stadium, and tourists and business travelers pay the bill. However, this approach runs into the Commerce Clause of the Constitution, which was designed to specifically prevent states from passing laws that burden interstate commerce or whose objective is local economic protectionism. Clearly that is the intent — and partially the effect — of these discriminatory rental car taxes. Cities and states want to export their tax burden, a practice some would call “Taxation without Representation.”

    The Constitution vests Congress with the exclusive right to regulate interstate commerce. When the railroad industry became burdened with excessive local property taxes, Congress passed legislation limiting those local taxes on railroads. When the airline industry became a target for excessive state and local taxes, Congress passed legislation restricting the ability of state and local governments to tax airline customers. Similar federal laws protect the commercial bus and motor carrier industries. Barring these federal laws, these other modes of transportation would no doubt face the same level of excessive taxation as rental car customers do today.

    ASTA and our members have a significant stake in this debate, given that travel agency sales account for 31 percent of the $24.5 billion U.S. car rental industry. These discriminatory taxes are a classic illustration of the ill effects of short-term thinking. Over the long term, such taxes threaten to suppress travel and tourism to and within the jurisdictions that impose them. Leisure travelers and corporate business planners alike exercise care in choosing among competing destinations for vacations and meetings. Once a destination is overburdened with state and local taxes, whether for hotel rooms, car rentals, airport fees, or some combination of these, that destination threatens to become cost-prohibitive to potential visitors.

    That is why ASTA — and a growing broad-based coalition of consumer and business organizations — supports HR 2543, the “End Discriminatory State Taxes for Automobile Renters Act,” sponsored by Reps. Steve Cohen, D-Tenn., and Sam Graves, R-Mo., with a multitude of bipartisan co-sponsors. This bill, modeled after existing federal laws that protect the other industries in interstate commerce mentioned above, would prohibit any future state or local discriminatory rental car taxes but would not interfere with existing revenue sources. The bill is in the House awaiting action. For the benefit of all travelers, it needs to pass this Congress.

    Some might equate trying to get this Congress to act equivalent to a Hail Mary pass, but now is the time for Congress to throw a flag on local governments that still think they can soak out-of-town renters with excessive taxes to pay for local projects.

    Eben Peck is vice president, government affairs at the American Society of Travel Agents, the leading global advocate for travel agents, the travel industry and the traveling public.

Press Releases

  • ATR Highlights EDSTAR in House Testimony

    WASHINGTON, DC -- On June 1st, Grover Norquist, president of Americans for Tax Reform and a member of the CART coalition, testified before the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law on the importance of passing the End Discriminatory State Taxes on Automobile Renters Act (EDSTAR). 

    “Over the last several decades, Congressional action has been needed to prevent discriminatory taxes against specific industries. Not being considered today is H.R. 1528, the End Discriminatory State Taxes for Automobile Renters Act (EDSTAR) introduced by Representatives Sam Graves and Steve Cohen. If passed, EDSTAR would put an end to new, discriminatory state taxes on rental car companies and their customers. In terms of preventing states from exporting taxes on to people who could never vote in their elections, I hope this committee or another committee of jurisdiction will consider the merits of these bills as well.”

    EDSTAR legislation was introduced in the House of Representatives earlier this year by Representatives Cohen and Graves and Senators Blumenthal and Kirk in the Senate. Mr. Norquist’s testimony highlights the importance of passing legislation to end discriminatory rental car taxes.

    Rental car taxes across the country harm businesses and consumers alike. These taxes increase travel costs, raising prices for families and many small businesses. Insurance rates rise because coverage typically provides for rental cars when repairs are necessary. And since rentals account for 1.6 million new vehicle sales, nearly 10 percent overall, the auto industry and the jobs it supports are profoundly affected.

    CART will continue advocating for EDSTAR throughout the legislative process and is counting on CART coalition members, the bill's sponsors and co-sponsors to continue championing the issue.

    CART partners with organizations from across the political spectrum that include some of America's leading companies, policy organizations, labor and consumer advocate groups, such as American Society of Travel Agents, Americans for Tax Reform, the National Urban League, United Auto Workers, Property Casualty Insurers Association of America and National Consumers League. CART is dedicated to passing fair policies that will grow the economy and remove barriers to consumers and businesses alike and supports congressional action that would put a stop to increasing rental car taxes across the country.

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    DOWNLOAD THE FULL PRESS RELEASE 

  • EDSTAR Introduced in U.S. Senate

    WASHINGTON, DC -- The Curb Auto Rental Taxes (CART) Coalition, a group of national organizations dedicated to protecting consumers from discriminatory car rental excise taxes, commends U.S. Senators Mark Kirk (R-IL) and Senator Richard Blumenthal (D-CT) for introducing S. 1164 the End Discriminatory State Taxes for Automobile Renters Act (EDSTAR).   The bill would protect consumers by limiting the discriminatory taxes state and local legislators can impose on automobile rentals by leveraging Congress's well-established constitutional authority to regulate interstate commerce.

    State and federal courts have ruled that rental car transactions constitute interstate commerce per the Commerce Clause. As such, the legislation stands to align the rental car industry with other modes of interstate transportation including railroads, airlines, and buses and would protect rental car consumers from discriminatory taxes in the same way Congress has protected consumers who utilize these other forms of interstate transportation.

    EDSTAR would block states and local authorities from imposing new rental car taxes but would not alter those already in effect. Since 1990, more than 100 burdensome rental car taxes have been enacted in 43 states and the District of Columbia, adding up to more than $7.5 billion in taxes above and beyond the standard sales taxes typically assessed on other goods and services.

    "Car rental excise taxes are regressive, discriminatory, economically harmful, and constitutionally troublesome," explained CART spokesman Kevin Lawlor. "Our broad coalition believes that this bill will protect consumers by preventing state and local legislators from furthering an existing problem."

    Rental car taxes unfairly single out consumers who travel because they are taxed without representation.  Local politicians target these consumers with impunity, knowing they live and vote in other jurisdictions. Without accountability, such revenue is often used recklessly to fund extravagant projects having little to do with transportation and providing little benefit to those actually paying the taxes.

    "High rental car taxes are causing tourists to cut back on travel which in turn, hurts the 563,000 jobs in Illinois that rely on the hospitality industry," Senator Kirk said. "Rental car taxes have cost consumers more than $7.5 billion since 1990.  This bill provides needed tax relief and more accurate pricing of rental cars."

    Moreover, the greatest impact is on those who can least afford it; in a recent study of consumers renting from off-airport locations in their own neighborhood, households earning less than $50,000 a year paid 41 percent of all car rental taxes.  Such taxes also in effect discriminate against minorities, who were 75 percent more likely to rent cars than non-Hispanic whites at these locations.

    "This bill will eliminate an egregiously unfair tax, burdening an industry significant to Connecticut and help drive tourism, jobs, and economic growth," said Senator Blumenthal. "Rental car customers should not face such discriminatory taxation; rather, they should be provided with the same protections already granted to airline, train, and commercial bus customers."

    The economic consequences of excessive rental car taxes are far-reaching. For example, these taxes increase travel costs, which has implications for many related businesses. Insurance rates rise because coverage typically provides for rental cars when repairs are necessary. And since rentals account for 1.6 million new vehicle sales, nearly 10 percent overall, the auto industry and the jobs it supports are profoundly affected.

    CART will continue advocating for the bill throughout the legislative process and is counting on the bill's sponsors and co-sponsors to continue championing the issue.

    CART partners with organizations from across the political spectrum that include some of America's leading companies, policy organizations, labor and consumer advocate groups, such as American Society of Travel Agents, Americans for Tax Reform, the National Urban League, United Auto Workers, Property Casualty Insurers Association of America and National Consumers League. CART is dedicated to passing fair policies that will grow the economy and remove barriers to consumers and businesses alike and supports congressional action that would put a stop to increasing rental car taxes across the country.

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    Download the full press release

  • EDSTAR Introduced in U.S. House of Representatives

    WASHINGTON, DC— The Curb Auto Rental Taxes (CART) Coalition, a group of national organizations dedicated to protecting consumers from discriminatory car rental excise taxes, commends U.S. Representatives Sam Graves (R-MO) and Steve Cohen (D-TN) for introducing H.R. 1528, the End Discriminatory State Taxes for Automobile Renters Act (EDSTAR). The bill would protect consumers by limiting the discriminatory taxes state and local legislators can impose on automobile rentals by leveraging Congress’s well-established constitutional authority to regulate interstate commerce. 

    "In 1994, Congress passed legislation to prevent new taxes on car rental companies to fund non-airport related expenses," said Rep. Graves. "Unfortunately, local governments have been exploiting a loophole in the law ever since, and many non-airport projects continue to be funded with these taxes. This practice is not only deceiving, but it discourages tourism in America," Rep. Graves continued. "My bill will close the loophole that discriminately taxes unsuspecting rental car consumers."

    "While state and local governments must raise revenue, it is wrong to impose discriminatory taxes on out-of-state citizens," said Congressman Cohen. "These unnecessary and unfair taxes raise prices for consumers and harm local employers, and our bill would put an end to them."

    State and federal courts have ruled that rental car transactions constitute interstate commerce per the Commerce Clause. As such, the legislation stands to align the rental car industry with other modes of interstate transportation including railroads, airlines, and buses and would protect rental car consumers from discriminatory taxes in the same way Congress has protected consumers who utilize these other forms of interstate transportation.

    EDSTAR would block states and local authorities from imposing new rental car taxes but would not alter those already in effect. Since 1990, more than 100 burdensome rental car taxes have been enacted in 43 states and the District of Columbia, adding up to more than $7.5 billion in taxes above and beyond the standard sales taxes typically assessed on other goods and services. 
     
    “Car rental excise taxes are regressive, discriminatory, economically harmful, and constitutionally troublesome,” explained CART spokesman Kevin Lawlor. “Our broad coalition believes that this bill will protect consumers by preventing state and local legislators from furthering an existing problem.”

    Rental car taxes unfairly single out consumers who travel because they are taxed without representation.  Local politicians target these consumers with impunity, knowing they live and vote in other jurisdictions. Without accountability, such revenue is often used recklessly to fund extravagant projects having little to do with transportation and providing little benefit to those actually paying the taxes. 

    Moreover, the greatest impact is on those who can least afford it; in a recent study of consumers renting from off-airport locations in their own neighborhood, households earning less than $50,000 a year paid 41 percent of all car rental taxes.  Such taxes also in effect discriminate against minorities, who were 75 percent more likely to rent cars than non-Hispanic whites at these locations. 

    The economic consequences of excessive rental car taxes are far-reaching. For example, these taxes increase travel costs, which has implications for many related businesses. Insurance rates rise because coverage typically provides for rental cars when repairs are necessary. And since rentals account for 1.6 million new vehicle sales, nearly 10 percent overall, the auto industry and the jobs it supports are profoundly affected. 

    CART will continue advocating for the bill throughout the legislative process and is counting on the bill’s sponsors and co-sponsors to continue championing the issue.

    CART partners with organizations from across the political spectrum that include some of America’s leading companies, policy organizations, labor and consumer advocate groups, such as American Society of Travel Agents, Americans for Tax Reform, the National Urban League, United Auto Workers, Property Casualty Insurers Association of America and National Consumers League. CART is dedicated to passing fair policies that will grow the economy and remove barriers to consumers and businesses alike and supports congressional action that would put a stop to increasing rental car taxes across the country.

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    Download the full press release

  • CART Coalition Launches Website

    WASHINGTON, DC -- In response to the growing trend of discriminatory excise taxes on rental car customers being used to fund projects like football stadiums and arenas,  a growing number of transportation and travel industry groups, along with consumer interest groups, have joined forces to jump start the Curb Auto Rental Taxes Coalition (CART).  CART advocates for the protection of consumers against discriminatory rental car taxes.

    The effort was launched via a newly designed website, www.curbautorentaltax.com, featuring legislative updates, enlightening infographics, media resources and opportunities for visitors to spread the word about the coalition, join the effort, or take action. 

    “Consumers are tired of sticker shock at the rental-car counter. The coalition website complements our educational and legislative efforts by amplifying the voices of consumers who want to combat unfair practices but don’t know how to start,” said to Ken McEldowney, Executive Director of Consumer Action. “Now more people will have access to the information they need to make informed decisions about rental car taxes and their consequences.”

    The new website will be bolstered by an increased use of social media platforms including the Twitter handle @CARTCoalition. 

    Industry and consumers will continue to work together to build Congressional support for H.R. 2543, the End Discriminatory State Taxes for Automobile Renters Act (EDSTAR), sponsored by Representative Steve Cohen (D-TN-09). H.R. 2543 is a bill in Congress that would put a stop to new discriminatory rental car taxes across the country.  The coalition is working with legislators in both the House and Senate, on both sides of the aisle. 

    “We are proud of the progress we have made educating Congress and attracting sponsors to this critical piece of legislation, but it became clear to us that we needed to do more to tell our story.  We need to make the information about our issues readily accessible to policymakers, the media and, most importantly, our consumers,” said Sharon Faulkner, Executive Director of the American Car Rental Association. 

    For more information visit the coalition website at www.curbautorentaltax.com and follow us on Twitter @CARTCoalition.

    Curb Auto Rental Tax (CART) is a coalition of 22 consumer, union, travel, auto manufacturers and rental industry organizations working for fair rental tax policies. 

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