The Consequences of Bad Tax Policy

Let me jog your memory a bit: in the Nov-Dec 2006 issue of Auto Rental News we introduced the new American Car Rental Association. The article was set in the context of yet another egregious car rental excise tax, in which the city of Revere, Mass. passed a $10 car rental surcharge to pay for the town’s public safety facility.

"We try to shift the (tax) burden away from our citizens as much as we can," Revere’s Mayor Tom Ambrosino told USA Today at the time. This quote rings in my ears today.

It was bad enough that the Thrifty location had to suffer this business disadvantage, while its renters had to suffer a $10 charge to pay for something they would never use. Frankly, there wasn’t much they could do about it.

Flash forward to this week, and a report from the Revere Journal with the headline: “Millions at Stake: Thrifty Car Rental Dollars Could Be Lost in Relocation.” The Thrifty will be moving out of Revere and into the new consolidated rental facility at Boston’s Logan Airport, and will take those tax dollars — about $750,000 per year — out of Revere.

We writers debate the exact definition of ironic, and I’m not going to ponder that here. But I will say this is delicious. Many times, there are no real consequences to predatory taxation, only the benefit of full tax coffers. But if the city of Revere had originally tried to tax its own constituents — the people who will benefit from the safety facility — that faucet would still be flowing.

But it gets better. In response to the eminent disappearance of funding, the city of Revere actually tried to pass special legislation that would allow the city to continue to collect from Thrifty — even when they moved out of the town entirely! The article states that the State Representative for Revere, Kathi-Anne Reinstein, tried to re-file the bill, but the lawyers for the legislature brought up the new bill’s constitutionality. “It’s kind of something that’s never been heard of before — a municipality getting revenue from a business that is not within the City…” she told the Revere Journal.  

The news article sums up the mood at Revere’s city hall with what I’ll call small town newspaper eloquence: “Within the City, the news of the bill’s rejection by state legal authorities came like an axe cutting one’s legs off at the knees. In short, it was devastating.”

This may not quite be over yet, but I finally have a retort for the good mayor, and I’m going Biblical: “The good Lord giveth, and the good Lord taketh away.” The town of Revere is reaping what it has sown.

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Originally posted on Business Fleet