WASHINGTON, May 24 /PRNewswire-USNewswire/ -- A diverse coalition of consumer organizations, travel associations and car rental companies announced today that they support H.R. 2453, which prohibits future discriminatory car rental excise taxes and protects the rights of all car rental customers.

Introduced yesterday by U.S. Representatives Rick Boucher (D-Virginia) and Chris Cannon (R-Utah), H.R. 2453 would prohibit future state or local discriminatory excise taxes on car rental consumers. Original co-sponsors are Rep. Dan Boren (D-Oklahoma), Rep. Russ Carnahan (D-Missouri), Rep. Steve Chabot (R-Ohio), Rep. William "Lacy" Clay (D-Missouri), Rep. Jim Jordan (R-Ohio), and Rep. John Sullivan (R-Oklahoma).

The bill would not affect standard state or local sales taxes, vehicle license fees or customary airport-related fees. In addition, the bill's provisions would not apply to any car rental excise taxes that were enacted prior to the bill's effective date.

Currently, there are nearly 100 car rental excise taxes in 42 states and the District of Columbia. These discriminatory taxes require car rental customers across the country to fund an array of projects and programs that have no direct connection to renting a car, nor confer any special benefit to car rental customers. In fact, car rental consumers have been forced to pay at least $6 billion to state and local governments (on top of the generally applicable taxes applied to goods and services) to fund unrelated initiatives like stadiums, highway construction projects, a performing arts center, a police and fire station, and even a sewage treatment plant.

As a result, a coalition, which includes the National Consumers League, has formed out of concern that more and more cash-strapped local governments are relying on car rental excise taxes to fund otherwise worthwhile civic projects. Furthermore, coalition members are encouraging municipalities, counties and states -- as they carry out their critical role in protecting consumer and citizen rights -- to extend that protection to all constituents, including car rental customers.

"These taxes, which cost consumers hundreds of millions of dollars annually, are discriminatory and regressive," said Linda Golodner, president and CEO of the National Consumers League. "They also impose a burden on consumers traveling in the nation's interstate transportation system."

When state and local lawmakers -- even under the guise of "states' rights" -- enact car rental excise taxes as a politically expedient means of shifting the tax burden to out-of-state renters, they interfere with the well-established principles of interstate commerce. Historically, Congress has prohibited unfair practices by state and local governments that unreasonably burden against interstate commerce and transportation. Examples include the "4R" Act (1976), the Airport and Airways Improvement Act (1978), the Motor Carrier Act (1980), and Bus Regulatory Reform Act (1982).

The "Coalition Against Discriminatory Car Rental Excise Taxes" also includes the National Business Travel Association (NBTA) and the American Society of Travel Agents (ASTA) -- as well as the American Car Rental Association (ACRA), the Truck Renting and Leasing Association (TRALA), and all of the major car rental companies such as the Avis Budget Group, Dollar Thrifty Automotive Group, Enterprise Rent-A-Car, Hertz, and Vanguard Car Rental USA (parent company of National Car Rental and Alamo Rent A Car). The car rental companies believe it is critically important to speak up on behalf of their customers because excise taxes are blatantly unfair not only to out-of-towners, but also to local consumers and businesses.

NBTA executive director and COO Bill Connors agrees. "Politicians have come to see the pockets of car rental customers as 'magic pots of gold' they can reach into any time there is a stadium, arts center, or other unrelated project to fund," he said. "Their actions are the result of a myth that they won't hurt anybody but a few one-time visitors. The reality is this -- by unfairly targeting one group of consumers these taxes hurt local economies in two ways. First, for those visitors who do rent cars, the taxes make a city or county less attractive as a repeat destination. Second, they create a hidden tax on local citizens and businesses who make up a significant portion of the car rental customer base."

Last September, the U.S. Travel & Tourism Advisory Board likewise noted in a special report -- titled Restoring America's Travel Brand: A National Strategy to Compete for International Visitors -- that "despite billions of dollars paid by car rental companies and customers in excess of normal taxes, there is no special benefit to rental car customers from such special venue taxes nor is there a direct connection between renting a car and using the public facilities or programs the taxes fund."

From the Tax Foundation Web site (http://www.taxfoundation.org)/

From an economist's perspective, these special excise taxes on the rental car industry are hard to defend. Most of them fail to satisfy basic, widely-agreed-upon principles of sound public finance.

For one, they're highly non-neutral. A basic goal of any tax system is to raise appropriate revenue for programs while doing the least harm to the economy. But these taxes seem designed to do the opposite. By singling out one industry for special taxation, these levies actually maximize the economic distortion of the tax system. A much more sound approach is to rely on broadly-based and low-rate taxes which raise large amounts of revenue but do less harm to the underlying economic activity.

Second, special rental car excise taxes don't closely link taxes paid with government services provided. This is a violation of what economists call the "benefit principle." For example, a special tax on gasoline to fund roads provided directly to drivers who use gas makes sense. But a special rental car tax used to supplement teacher's salaries, build sports stadiums, or fund other general government services bears no relationship to the industry being taxed. That's just poorly designed tax policy. General government services that benefit all residents should be funded through broadly-based levies, not high-rate excises on politically unpopular industries.

As we've noted before, there's a perception among lawmakers that rental car excise taxes are "good" taxes because they fall on tourists from other cities and states. While this is often not the case -- more than half of rental car customer are local, not visiting tourists -- it's a belief held by many lawmakers ... But this predatory approach to tax policy is impossible to defend from the perspective of sound public finance.

The primary goal of tax policy is to raise revenue for programs demanded by citizens. To make intelligent choices about the costs and benefits of those programs, citizens must understand their full costs. How is this possible when the benefits of programs accrue to residents, while the tax burden supporting the programs is "exported" to taxpayers in other areas?

As a result, many of the current and proposed rental car excise taxes are a vivid illustration of the old slogan "taxation without representation." And in a democratic system, that's just poor public policy.

To see a chart demonstrating the rise in car rental excise taxes enacted since 1972, click on the following link:

Photo: http://www.newscom.com/cgi-bin/prnh/20070524/AQTH155 About H.R. 2453

H.R. 2453 is a straightforward piece of legislation that prohibits state and local governments from imposing discriminatory state and local excise taxes on car rental customers on, or after, the date of introduction of the bill.

What H.R. 2453 would do: -- Would prohibit discriminatory state and local excise taxes on car rental customers enacted after the date of introduction of the bill in the House of Representatives; and -- Would "grandfather," or permit to continue, any existing discriminatory state or local excise tax that had been enacted on or prior to the date of introduction of H.R. 2453 in the House of Representatives, as long as the state or local authorization for a tax does not expire or the rate or basis of a tax does not change. What H.R. 2453 would not do: -- Would not prohibit states or local governments from enacting, or increasing the rate of, general taxes, such as sales taxes or property taxes, that are levied on all citizens or businesses; -- Would not prohibit states or local governments, as well as local and regional airport authorities, from imposing fees on car rental companies as a condition of doing business at an airport location (concession fees), as long as such fees do not violate an existing federal prohibition on taxing airport transactions to fund non-airport-related projects; and -- Would not cut off any existing stream of tax revenue from discriminatory excise taxes for state or local governments to fund existing projects due to the "grandfather" provision of the bill, as long as the state or local authorization for such a tax does not expire or the rate or basis of such a tax does not change.

CONTACT: Laura T. Bryant of Coalition Against Discriminatory Car Rental
Excise Taxes, +1-314-512-4178, laura.t.bryant@erac.com