The House Judiciary Subcommittee on Commercial and Administrative Law (CAL), held a hearing on June 16 regarding the "End Discriminatory State Taxes for Automobile Renters Act of 2009 (H.R. 4175)," authored by Rep. Rick Boucher (D-Va.).
The bill prohibits states or local governments from levying or collecting a discriminatory tax on the rental of motor vehicles, motor vehicle rental businesses, or motor vehicle rental property. A discriminatory tax is defined as a tax or tax assessment that is applicable to the rental of motor vehicles or motor vehicle businesses or property, but not to the majority of other rentals of tangible personal property within a state or locality.
Along with all car rental companies, the bill has support from a broad coalition of groups and associations, including those representing car and truck rental, automobile dealers, travel agents, insurers, consumer protection groups and business travelers, as well as the American Automotive Policy Council, which represents Chrysler, Ford and General Motors.
"During these tough economic times, state and local governments are looking to raise revenue," said Congressman Steve Cohen (D-Tenn.), chair of the House subcommittee. "But there is no place for discriminatory taxes in business. The testimony provided by our witnesses will go a long way toward helping us in Congress navigate this complicated issue."
Proponents of the bill pointed out that as of February 2010, 43 states and the District of Columbia have imposed 118 excise taxes on car rentals, eight times the number of these taxes that existed in 1990. Some 35 sports stadiums, a performing arts center and a culinary institute have been funded with car rental taxes. Industry research indicates that rental car customers have spent more than $7.5 billion in taxes to fund the pet projects of elected officials.
Sally Greenberg, executive director of the National Consumers League (NCL), testified that her home state of Minnesota is considering levying a 2.5 percent tax on rental cars to finance a new $1 billion-dollar stadium for the Minnesota Vikings.
"NCL understands the importance of citizens paying her or his share of taxes to provide critical services that we all rely on, for our schools, hospitals, libraries, clean water and safe roadways," said Greenberg. "But when rental car customers are asked to pay for stadiums or arts centers and the taxes imposed seem to have no limit, it's time to say, 'enough is enough!'"
Greenberg addressed numerous points in a June 2010 study conducted by the Brattle Group, a consulting group commissioned by the car rental industry. The study found that car rental excise taxes are not predominantly taxing out-of-town travelers, as 54 percent of the industry's revenues come from "home cities" rentals. The study also concludes that these taxes burden a disproportionate number of low income and minority households that rely on rentals for transportation.
"These social costs are too high. The taxes frequently fund projects that are completely unrelated to car rentals," said Rep. Boucher.
Timothy Firestine, chief administrative officer of Montgomery County, Md. spoke in opposition to the bill.
"[H.R. 4175's] preemption of the ability of states and localities to make their own determinations regarding the appropriate taxation of businesses ... represents an unwarranted federal intrusion into the long-recognized authority of local and state governments to make tax classifications and opens the door to unprecedented federal control and oversight of local and state tax authority."
Firestine is joined in opposition by the National League of Cities, the National Association of Counties, the U.S. Conference of Mayors and the Government Finance Officers Association.
Ray Wagner, vice president of government and public affairs for Enterprise Holdings, testified that Congress has prohibited the imposition of local taxes that discriminate on bus, airline and train transportation. "This legislation is an entirely appropriate complement to those existing laws," said Wagner. "The rental car industry is not seeking a handout. We simply want local governments to take their hands out of our customers' pockets, and treat our customers like those of most other industries."