To help plug a $2 billion state budget deficit, Gov. John Bel Edwards has proposed sweeping tax hikes that are on a fast track to the Legislature, some of which are distinctly unfair — particularly car rental and car sharing tax hikes.
The National Consumers League has been advocating against the expansion of rental car taxes for over a decade, and now, car sharing taxes.
Legislators often assume that tourists, business travelers and those with disposable incomes absorb rental and shared car taxes. It’s easy to believe that this tax will fall mostly on the visitors who crowd into New Orleans. However, more than half of all car rentals occur away from airports by local residents and car-sharing drivers.
An analysis of auto renters finds that households earning less than $100,000 annually pay half of all car rental excise taxes, making this a regressive tax. Working families earning less than $50,000 annually pay 19 percent. And 7 percent of car rental excise taxpayers earn less than $25,000 annually.
Basic car rental and car-sharing fees are typically reasonable, but the layers of tax and user fees build up.
In a study on the economic effects of car rental excise taxes, William G. Gale, Ph.D., of the Brookings Institution, and the Urban Institute’s Kim Rueben, Ph.D., concluded, “Although local governments may need to raise revenue, they should still seek to raise revenue in the most equitable and efficient manner possible. For a variety of reasons, stacking extra taxes on car rental customers is unjustified by almost any criteria.”
Make no mistake — this tax is not a “visitor tax.” Consumers who can afford it the least will feel it the most. Lawmakers should pause and ensure the most equitable path to fiscal solvency and not place an unfair burden on those who can least afford it.
executive director, National Consumers League.