TAX NEWS - June 2010

Detroit 3 lobbies to slow car rental tax

Washington -- Detroit's Big Three automakers want Congress to rein in rental car taxes.

Since 1990, local and state governments have collected $7.5 billion in rental car taxes. Often, the money is used to bankroll programs and projects such as sports stadiums and convention centers.

General Motors Co., Ford Motor Co. and Chrysler Group LLC called on Congress Thursday to end what it called "discriminatory taxes imposed by different states on consumers who need or choose to rent cars and trucks."

The American Automotive Policy Council, a trade association representing the Detroit Three, endorsed calls in Congress to bar new rental car taxes.

"The main argument used to support these discriminatory taxes on rental cars is that tourists, who are incorrectly assumed to be affluent, are paying them. So it's supposedly some type of 'luxury tax.' This is factually not true," said Stephen Collins, AAPC president.

"The reality is that a major percentage of cars are rented in the U.S. by low- and medium-income consumers. That fact is backed by figures showing that more than half of all cars rented are from neighborhood locations, not airports. This pattern of misdirected and clearly discriminatory taxation hurts consumers of all income levels, absolutely hurts American jobs."

Domestic automakers sell tens of thousands of vehicles annually to rental car fleets.

The United Auto Workers union also endorses the ban, which would apply to future rental car taxes.

A Michigan project funded by rental car taxes was Comerica Park, home of the Detroit Tigers. It is supported in part by a 2 percent levy on rental cars.

Enterprise Holdings Inc. -- which owns the Enterprise, Alamo and National Car Rental brands -- urged Congress to prohibit new rental car taxes.

"From the NBA to the NFL and Major League Baseball, consumers have been saddled with these discriminatory taxes so that these wealthy team owners can supplant their costs," said Ray Wagner, Enterprise's vice president of government and public policy.

Minorities are disproportionately affected by car rental taxes, Enterprise said, citing a study.

African-Americans generate 26 percent of rental car revenues and pay 27 percent of the excise taxes, despite the fact that they account for only about 12 percent of the population, Wagner said.

Local officials say Congress shouldn't get involved in local taxing decisions.