RALEIGH – First it was Big Tobacco and Big Oil. Then Big Pharma and Big Mac came along, the latest demonic industries to be unmasked and pursued by the political equivalent of big-game hunters: plaintiffs’ attorneys, crusading journalists, pious politicians, etc.
Some years ago, another industry, quite improbably, came into the crosshairs: Big Rent. By which I do not mean the San Francisco apartment market or a plus-size production of an overrated Broadway show. It is, rather, those dastardly denizens of car lots and airport terminals, the rental-car industry, and their customers.
The Triangle Transit Authority has levied a special tax on vehicle rentals to generate much of the local share of its annual revenue, which is devoted to such functions as the operation of near-empty buses in and out of the Research Triangle Park. Other communities also have car-rental taxes, too. In Charlotte, the latest push is for a hike of four percent on the tax to fund new uptown museums and theaters. Part of the $151 million project would consist of facilities built in conjunction with Wachovia, apparently a shoestring financial operation in need of a bailout from Big Rent.
Why should those who rent vehicles bear an extra fiscal burden? The argument is that visitors to a region, who make up the lion’s share of car rentals, are a logical group upon which to foist the cost of such amenities as transportation improvements, convention centers, and tourist attractions. Of course, it doesn’t hurt the political attractiveness of the idea that visitors aren’t part of the electorate, and thus can’t vote politicians out of office for compelling them to finance construction projects that mostly benefit local residents.
The argument is commonplace. But I don’t find it persuasive.
For one thing, it is based on a flawed assumption: that rental-car taxes are an efficient way to target non-residents for extra charges. A large segment of the market for rental cars consists of local people who have had traffic accidents and are getting their own cars repaired. Another group consists of local business managers who rent cars for their employees, clients, or vendors. Still another group includes local families who rent vans, SUVs, or trucks for vacation trips or moves.
None of these customers is “just visiting.” None is imposing a significantly higher cost on the local roadways, or making a greater-than-average use of art museums or civic centers. There is no good fiscal reason to tax them more than their peers for services they may not even use.
In the Charlotte case, the city establishment’s plan to force average Joes to pay more so wealthy people can have new places to play – let’s be blunt about this – may fail because any increase in the tax has to go through the General Assembly first. Typically, local tax bills such as this one do not garner support in Raleigh unless a locality’s entire legislative delegation is on board. Fortunately for taxpayers and common sense, several local lawmakers say they are implacably opposed to the plan. It is possible that legislative leaders will push the tax increase through anyway, in contravention of normal procedure, but I wouldn’t bet on it, given current distractions.
Merely stopping a bad idea in Charlotte isn’t enough, though. It’s time to repeal all special taxes on car rentals in North Carolina. They should bear the same tax rate as any other purchase, with the money used for general operating expenses. Call it tax reform.
Hood is president of the John Locke Foundation.