Congress has the Constitutional authority to regulate interstate commerce and courts have ruled that car rentals involve a national market. - Photo via Depositphotos.

Congress has the Constitutional authority to regulate interstate commerce and courts have ruled that car rentals involve a national market.

Photo via Depositphotos.

Congressmen Steve Cohen (D-TN) and Steve Chabot (R-OH) have introduced the End Discriminatory State Taxes for Automobile Renters Act, limiting the use of excise taxes on “out-of-town” visitors renting cars to raise revenue for local needs.   

The bill, H.R. 4311, would impose a moratorium on new car rental excise taxes while grandfathering in the existing ones. Congress has the Constitutional authority to regulate interstate commerce and courts have ruled that car rentals involve a national market. In addition, car rental taxes hit those least able to pay them while affecting car insurance rates for every motorist. 

Following the passage of the Davis-Cohen amendment to the House FAA bill passed in October 2018, intended to prevent new discriminatory taxes or fees on airport rentals, H.R. 4311 aims to prevent these taxes on non-airport or "neighborhood" rentals. 

"The car rental industry is a key component of our interstate economy, especially with respect to travel and tourism," Chabot said in a statement. "Unfortunately, because many of their customers are out-of-town travelers, car rental businesses have increasingly become an easy target for local governments looking to raise tax revenue without upsetting local residents. These discriminatory tax practices are a drag on the economy, reducing demand for rental cars, raising car insurance rates, and negatively impacting new car purchases by rental companies."

The proposed legislation would:

  • Prohibit state and local governments from adopting new discriminatory taxes or fees on car rental consumers after the date of enactment;
  • “Grandfather” any existing discriminatory taxes or fees until the tax is repealed or sunsets;
  • Allow state and local governments to continue to impose non-discriminatory taxes (such as income, sales, property and other broad-based taxes and fees). Also preserves current and future airport-related fees that are imposed solely at the airport.

“State and local governments are looking to raise revenue with the least impact on their constituents, and I understand that," Cohen said in a statement. "However, these taxes, which are supposed to target ‘outsiders,’ actually hurt residents with the least ability to pay these taxes. These taxes can be particularly problematic in areas that have insufficient public transit. This is an unfair practice that must stop.” 

Thirty-seven bi-partisan groups have come out in favor of the legislation including the American Car Rental Association, Global Business Tracel Association, American Society of Travel Agents, and United Auto Workers, in addition to other transportation groups and auto manufacturers.

A companion bill is set to be introduced in the Senate soon.

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