Local Governments Tell Congress No To Proposed Ban on Taxes

by Lars Etzkorn

This week, NLC testified before the House Judiciary Subcommittee on Courts, Commercial and Administrative Law in opposition to legislation preempting local authority over rental car taxes. Specifically, the bill prohibits cities and states from imposing taxes on rental cars at a rate higher than they tax other businesses, what proponents call "discriminatory taxes."

Cities and states "maintain that any industry's plea for federally mandated tax favoritism opens the door to other industries asking Congress for similar special exemptions or protections from state and local taxing authority," said Ray Warren, deputy commissioner, Office of the Commissioner of Revenue, Arlington County, Va., who testified on behalf of NLC, the National Association of Counties, the U.S. Conference of Mayors and the Government Finance Officers Association. "Legislation of this kind poses a dire threat not merely to state and local tax revenues, but to the entire existence of independent state and local taxation authority in our system of federalism.

"The implications of passing legislation like H.R. 2469, particularly in these tight budgetary times, would not necessarily lower the tax burden on consumers, but would rather shift the burden onto other taxpayers," Warren added. "Thus, while the tax burden on some consumers might be relieved, the burden on others would surely [increase] ... as states and localities ... recoup lost revenue to fund essential services maintained ... by rental car taxes."

Nor does the determination that a tax is "discriminatory" take into account offsetting exemptions. For example, some states exempt the inventory of rental vehicle companies from property taxes, as well as the rental of vehicles from the state's sales and use tax. But the bill makes no allowance for such offsets.

NLC and its partners oppose the End Discriminatory State Taxes for Automobile Renters Act of 2011, introduced by Rep. Steven Cohen (D-Tenn.).