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1 Garrett Watson, Reforming Rental Car Excise Taxes 1 (2019)

handle is hein.taxfoundation/refrcar0001 and id is 1 raw text is: Reforming Rental Car Excise Taxes FISCAL FACT No. 645 Mar. 2019 Garrett Watson Special Projects Manager The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, local, and global levels. We are a 501(c)(3) nonprofit organization. @2019 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Key Findings - State and local governments have used car rental excise taxes to raise revenue, including for projects like stadium construction and amateur sports funding. Forty-four states levy rental car excise taxes. Most states also permit county and municipal governments to add a rental car tax, which may range from a flat-dollar surcharge to an ad valorem percentage of the value of the car rental. - Car rental excise taxes are levied in concert with state and local sales taxes, airport concession fees, and vehicle license and registration recovery fees. This has created a byzantine structure of taxes and fees, with effective tax rates on consumers often exceeding 30 percent. - Excise taxes on car rentals are unsound tax policy, as they narrowly target one industry in the hope of exporting the tax base onto nonresidents. This has negative effects for residents when they pay higher prices for rental car services. States also experience lower economic growth when travelers adjust their behavior to avoid the tax. Evidence shows that travelers reduce their demand for car rentals when taxes rise and travel across state lines in search of a better deal. - The sharing economy has given people the opportunity to rent out their own cars through peer-to-peer car-sharing arrangements. Peer-to-peer car sharing is projected to grow from $5 billion in 2016 to $11 billion in 2024-20 percent growth per year. This has led to discussions about whether to levy car rental excise taxes on car sharing. Instead of extending poor tax policy onto new business models, policymakers should reevaluate the tax regime imposed on car rental services. States that have not incorporated car rental services into their sales tax bases should do so, and states with rental car excise taxes should repeal them.

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