Rental Car Users Pay Cities’ Bills

Monday, November 14, 2005
Rental car users pay cities’ bills
Indy among locales taxing travelers to help cover costs of municipal projects
By Avery Johnson
The Wall Street Journal

Editors Note: This article is an example of why we must ALWAYS keep a close watch on the politicians. They have a history of spending beyond their means and then finding interesting ways to raise funds to make up for their inability to manage effectively. Don’ t think that user fees won’t apply to GA. If they believe there is an additional way to tax us, they will use it.

In cities across the country, people who rent cars are getting hit with a host of new taxes. As of this August, there were 44 rental car tax proposals pending or approved by local governments, up from just three on the books in the beginning of 2004, according to Enterprise Rent-A-Car Co.

At Chicago’s Midway Airport, for example, a new charge of $3.75 per day went into effect Sept. 1. Overall, the taxes range from 0.8 percent of the bill to $10 per rental. That might not sound like much, but an extra $10-per-day charge can almost double the cost of renting an economy car in some cases, because base prices are near historic lows and some companies have been running aggressive weekend specials.

The flurry of taxation is partly due to the fact that the rental-car industry’s trade association was dissolved in June, leaving it with no effective lobby. The industry is notoriously fractious, making it harder for companies to jointly combat tax increases. Also, rental cars are considered ripe for taxation because more than half of customers rent at an airport, so lawmakers assume they don’t live in the town and can’t vote down the proposed fee.

The fees are being levied to pay for things like stadiums, museums — and alternatives to renting a car, such as monorails and rail lines. State and local lawmakers got hit hard by the recent economic downturn and have become more creative about looking outside their constituencies for funding.

Some of the new taxes are taking effect as travelers are making plans for the busy holiday season. That means they are likely to sting even more, since many companies raise their rates around this time of year.

Because most of the taxes are passed at the local level, travelers face a hodgepodge of charges. Some fees, for example, apply at the airport but not in town. This means travelers can sometimes avoid taxes by taking a cab across city lines or flying into an airport where the fees are lower. But sometimes the quest to avoid the fees can be more expensive than the fees themselves.

The increased use of rental car taxes was touched off last year in Kansas City, Mo., when the city passed a new fee of $4 per day on cars rented in the city limits. The money is going to help pay for a new sports arena. Then in April of this year, Arlington, Texas, put a 5 percent tax on cars rented in the city to fund a new stadium for the Dallas Cowboys (Arlington borders Fort Worth). Indianapolis increased its rental car tax to 4 percent from 2 percent on rentals within the city limits as of July 1.

Last month, Revere, Mass., about a mile from Logan Airport outside Boston, added a $10 tax per rental car transaction to fund a police-and-fire station. Tom Ambrosino, Revere’s mayor, says that rental cars should be taxed because they add wear and tear to the roads and create more traffic and pollution.

On a trip to Tampa, Fla., in March, David Walajtys, 45, Wakefield, R.I., says taxes and fees amounted to a third of his bill when he rented for two days. “It’s really unfair that the cities do this because most of the time, it’s to pay for a stadium or something that you’re never going to use.”

The good news for consumers is that increased competition has pushed car rental base rates to low levels over the past couple of years. The average one-day price of a midsize car booked a week in advance is $47.61, down from $50.91 two years ago, according to Abrams Consulting Group, Purchase, N.Y.

Some travelers are finding ways to avoid the new fees. Matt Holdrege, a 43-year-old telecommunications industry executive who splits time between Los Angeles and Burgundy, France, says he’s chosen not to take a nonstop between Los Angeles and Boston (where there’s a $10 charge on rentals within the city limits) and instead flies through Chicago’s O’Hare airport to Manchester, N.H., to rent a car there. In Las Vegas and New York, he takes taxis.

Renting in neighborhoods is usually a good way to avoid some taxes. A study done by online travel agency Travelocity in March found that airport taxes averaged 25.8 percent, while taxes on neighborhood rentals were 14.1 percent.

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