    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

       END DISCRIMINATORY STATE TAXES FOR AUTOMOBILE RENTERS ACT OF 2009

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                       COMMERCIAL AND ADMINISTRATIVE LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 4175

                                   __________

                                 JUNE 15, 2010

                                   __________

                               Serial No. 111-122

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

                      U.S. GOVERNMENT PRINTING OFFICE
    56-953                    WASHINGTON : 2010
    -----------------------------------------------------------------------
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                           COMMITTEE ON THE JUDICIARY

                     JOHN CONYERS, Jr., Michigan, Chairman
    HOWARD L. BERMAN, California         LAMAR SMITH, Texas
    RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr.,
    JERROLD NADLER, New York                 Wisconsin
    ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
    MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
    ZOE LOFGREN, California              BOB GOODLATTE, Virginia
    SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
    MAXINE WATERS, California            DARRELL E. ISSA, California
    WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
    STEVE COHEN, Tennessee               STEVE KING, Iowa
    HENRY C. ``HANK'' JOHNSON, Jr.,      TRENT FRANKS, Arizona
      Georgia                            LOUIE GOHMERT, Texas
    PEDRO PIERLUISI, Puerto Rico         JIM JORDAN, Ohio
    MIKE QUIGLEY, Illinois               TED POE, Texas
    JUDY CHU, California                 JASON CHAFFETZ, Utah
    TED DEUTCH, Florida                  TOM ROONEY, Florida
    LUIS V. GUTIERREZ, Illinois          GREGG HARPER, Mississippi
    TAMMY BALDWIN, Wisconsin
    CHARLES A. GONZALEZ, Texas
    ANTHONY D. WEINER, New York
    ADAM B. SCHIFF, California
    LINDA T. SANCHEZ, California
    DANIEL MAFFEI, New York
    JARED POLIS, Colorado

           Perry Apelbaum, Majority Staff Director and Chief Counsel
          Sean McLaughlin, Minority Chief of Staff and General Counsel
                                     ------

               Subcommittee on Commercial and Administrative Law

                        STEVE COHEN, Tennessee, Chairman

    WILLIAM D. DELAHUNT, Massachusetts   TRENT FRANKS, Arizona
    MELVIN L. WATT, North Carolina       JIM JORDAN, Ohio
    DANIEL MAFFEI, New York              HOWARD COBLE, North Carolina
    ZOE LOFGREN, California              DARRELL E. ISSA, California
    HENRY C. ``HANK'' JOHNSON, Jr.,      J. RANDY FORBES, Virginia
      Georgia                            STEVE KING, Iowa
    ROBERT C. ``BOBBY'' SCOTT, Virginia
    JOHN CONYERS, Jr., Michigan
    JUDY CHU, California

                         Michone Johnson, Chief Counsel

                        Daniel Flores, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 JUNE 15, 2010

                                                                       Page

                                    THE BILL

    H.R. 4175, the ``End Discriminatory State Taxes for Automobile
      Renters Act of 2009''..........................................     3

                               OPENING STATEMENTS

    The Honorable Steve Cohen, a Representative in Congress from the
      State of Tennessee, and Chairman, Subcommittee on Commercial
      and Administrative Law.........................................     1
    The Honorable Trent Franks, a Representative in Congress from the
      State of Arizona, and Ranking Member, Subcommittee on
      Commercial and Administrative Law..............................    12

                                   WITNESSES

    The Honorable Rick Boucher, a Representative in Congress from the
      State of Virginia
      Oral Testimony.................................................    14
      Prepared Statement.............................................    16
    Mr. Raymond T. Wagner, Jr., Vice President, Government and Public
      Affairs, Enterprise Holdings, Inc.
      Oral Testimony.................................................    20
      Prepared Statement.............................................    23
    Mr. Timothy Firestine, Chief Administrative Officer, Montgomery
      County, Maryland, on behalf of the National League of Cities,
      the National Association of Counties, the U.S. Conference of
      Mayors, and the Government Finance Officers Association
      Oral Testimony.................................................    31
      Prepared Statement.............................................    34
    Ms. Sally Greenberg, Executive Director, National Consumers
      League
      Oral Testimony.................................................    41
      Prepared Statement.............................................    44

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Prepared Statement of the Honorable John Conyers, Jr., a
      Representative in Congress from the State of Michigan,
      Chairman, Committee on the Judiciary, and Member, Subcommittee
      on Commercial and Administrative Law...........................    66
    Response to Post-Hearing Questions from Raymond T. Wagner, Jr.,
      Vice President, Government and Public Affairs, Enterprise
      Holdings, Inc..................................................    69
    Response to Post-Hearing Questions from Mr. Timothy Firestine,
      Chief Administrative Officer, Montgomery County, Maryland, on
      behalf of the National League of Cities, the National
      Association of Counties, the U.S. Conference of Mayors, and the
      Government Finance Officers Association........................    72
    Response to Post-Hearing Questions from Sally Greenberg,
      Executive Director, National Consumers League..................    75
    Prepared Statement of Dr. Kevin Neels, The Battle Group..........    78
    Prepared Statement of the Federation of Tax Administrator........    98
    Prepared Statement of Stephen J. Collins, American Automotive
      Policy (AAPC) Council..........................................   100
    Prepared Statement of Jeffrey Friedman, Sutherland, Asbill &
      Brennan LLP....................................................   103
    Letter from Grover Norquist, President, Americans for Tax Reform.   113
    Letter from Richard D. Broome, Sr. Vice President, Corporate
      Affairs & Communications, The Hertz Corporation................   114
    Letter from Chris Russo, President and Chair, American Society of
      Travel Agents (ASTA)...........................................   116
    Letter from Joe B. Huddleston, L.L.D., Executive Director,
      Multistate Tax Commission (MTC)................................   118
    Prepared Statement of the Truck Renting and Leasing Association
      (TRALA)........................................................   120
    Letter from Alan Reuther, Legislative Director, International
      Union, United Automobile, Aerospace & Agricultural Implement
      Works of America--UAW..........................................   123

       END DISCRIMINATORY STATE TAXES FOR AUTOMOBILE RENTERS ACT OF 2009

                                  ----------

                             TUESDAY, JUNE 15, 2010

                  House of Representatives,
                         Subcommittee on Commercial
                                and Administrative Law,
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Subcommittee met, pursuant to notice, at 11:13 a.m., in
    room 2141, Rayburn House Office Building, the Honorable Steve
    Cohen (Chairman of the Subcommittee) presiding.
        Present: Representatives Cohen, Johnson, Scott, Chu,
    Franks, and Jordan.
        Staff present: (Majority) Norberto Salinas, Counsel; Adam
    Russell, Professional Staff Member; and (Minority) Stewart
    Jeffries, Counsel.
        Mr. Cohen. This hearing of the Committee of Judiciary
    Subcommittee on Commercial and Administrative Law will now come
    to order. Without objection the Chair will be authorized to
    declare a recess of the hearing. I will now recognize myself
    for a short statement.
        The Congress is well aware of the plight of state and local
    governments caused by the current recession. And because state
    and local governments need more revenue, consumers may see an
    increase in taxes to help balance budgets.
        Only in certain states they will see that and some states
    that will see their budgets slashed. With this in mind though,
    many witnesses have urged us not to pass legislation which may
    restrict state's abilities to tax. However, we have also
    written that some state and local taxes unduly burden a single
    industry and its consumers.
        Taxes on the rental of cars and trucks are one such
    discriminatory tax which hits consumers' pocketbooks. Some
    consumers may be shocked when the quoted price of renting a car
    is nowhere near what they pay. I am one of those consumers.
        The shock stems not from the price charged by the rental
    company, oftentimes sounding inviting and low, but because of
    the added taxes and fees which can increase the total rental
    price 15 to 25 percent or more and makes one look at their
    receipt and say, ``What happened to the rate they quoted me
    when I called them on the 800 number?''
        The rate of these taxes is often far higher than the local
    tax rate placed on goods services. No matter the reasoning
    behind these higher tax rates, the taxation of the rental cars
    and trucks is a familiar form of discriminatory taxation which
    may burden interstate commerce.
        These taxes also chill car rental companies from investing
    and expanding. Conventional wisdom tells us that tourists and
    business travelers feel the primary impact of car rental taxes
    and fees and that local governments target these taxes at
    visitors and not their residents.
        It also tells us the local governments adhere to the old
    adage that as I understand Senator Russell Long first coined
    and then a dear colleague, a Republican conservative from
    Millington, Tennessee, Senator Leonard Dunavant of blessed
    memory used to say, ``Don't tax me, don't tax thee, tax that
    person behind that tree.'' So this is perfectly in accord with
    Senator Dunavant's warnings.
        According to a recent report that assumption is incorrect,
    though, statistics reveal that more motor vehicles are rented
    from neighborhood locations than from airport facilities. Thus,
    car rental taxes and fees disproportionately fall on local
    residents who often rent cars while their own vehicles are
    being repaired or vans to ferry little league teams to baseball
    tournaments or other heart-rending activities that we could
    have listed here in this opening statement.
        Today we hold a hearing on H.R. 4175, the ``End
    Discriminatory State Taxes for Automobile Renters Act of
    2009.'' H.R. 4175 would impose a moratorium on any new taxes,
    discriminatory that they may be or not, with respect to the
    rental of motor vehicles, businesses who rent motor vehicles or
    the property of those businesses. The legislation would prevent
    increasing taxes imposed solely on the rental of cars and
    trucks.
        [The bill, H.R. 4175, follows:]

                                   __________
        Mr. Cohen. Similar to other tax bills before this
    Committee, the moratorium on new discriminatory taxes should
    encourage the motor vehicle rental industry and local
    governments to come together and work on reforming the current
    tax structure.
        For example, the state and local governments and the car
    rental industry could work together to broaden the tax base
    rather than have state and local governments over rely on a few
    hundred taxpayers. Of course, that would require enlightened
    legislators and local officials. But we will see what happens.
        Such reform would maintain a steady stream of revenue for
    state and local governments while ensuring a fair tax burden
    for consumers such as those who rent cars and trucks. This
    hearing will provide Members of the Subcommittee the
    opportunity to hear testimony about local government's reliance
    on taxes and fees on the rental of motor vehicles.
        Members will also hear testimony about how those taxes and
    fees impact consumers and the car rental industry, and the
    testimony should help determine whether or not Congress should
    intercede with this legislation.
        As you may be aware, 2 months ago this Subcommittee held a
    hearing on the current plight of state and local governments
    that they are experiencing in this recession. I can certainly
    sympathize with their concerns as they receive lower revenues,
    but they are still expected to provide these services that they
    have done over the years.
        However, we need fair tax policies which do not act as
    another regressive tax on consumers, and we need fair tax
    policies which encourage capital investment rather that
    discourage it. Fortunately, to the rescue, comes Representative
    Boucher, who introduced this legislation, drafted it so as to
    not affect current government revenues.
        H.R. 4175 will not prevent taxing authorities from
    continuing to tax the rentals of motor vehicles or the rental
    companies and so that will allow them to continue to fund the
    stadia and arenas and whatever other assorted goods and
    services and products that they have and facilities that they
    fund. Instead, this will impose a moratorium on new
    discriminatory taxes.
        So I thank Mr. Boucher for his work. Accordingly, I look
    forward to receiving today's testimony and I now recognize my
    colleague Mr. Franks, the distinguished Ranking Member of the
    Subcommittee, for his opening remarks.
        Mr. Franks. Well, thank you, Mr. Chairman. I am going to
    get you to introduce me at my next speech somewhere. Just want
    to thank you for the effort to hold this hearing, and I know
    that the Subcommittee has held many hearings on discriminatory
    taxation over the years, but I believe today's hearing is--on
    H.R. 4175, the ``End Discriminatory Taxes for Automobile
    Renters Act,'' I think that it is a first.
        And while the subject of today's hearing, namely rental
    cars, may be new, the general topic of discriminatory taxes--I
    will get that word--is not new. Supporters of H.R. 4175 claim
    that states and localities target rental car companies and
    consumers for unusually high and discriminatory taxes. And I
    think the research is certainly in their favor.
        They claim that these discriminatory taxes are often used
    to pay for new stadiums or other municipal improvements. And in
    other words, while the citizens get to enjoy the benefits of a
    new ballpark, the costs are passed on to tourists and business
    travelers who had no say in the financing decisions behind
    those projects.
        And such exportation of tax burdens, if true, Mr. Chairman,
    of course troubles me. And of course I am also concerned that
    discriminatory taxes are a job killer fundamentally.
        Supporters of H.R. 4175 also point to the economic impact
    that these discriminatory taxes have on our Nation's auto
    industry. Rental car companies purchased over 1 million autos
    from General Motors, Chrysler and Ford in 2008. That
    constituted more than 15 percent of the Big 3 car sales last
    year.
        Given the financial interest the Federal Government has in
    those companies and with no fault in mind, just for the record
    and hence American taxpayers have taken in General Motors and
    Chrysler, we should be aware of state taxation regimes that
    threaten the viability of those entities.
        Now that said, I know that discrimination, at least in this
    context, can be in the eye of the beholder. So to that end, we
    will hear from the states and localities that they are hurting.
    My own state, of course, is currently trying to close a $3
    billion deficit, so I understandably sympathize with their
    plight as well.
        And as I have said repeatedly at these hearings, I am a
    strong supporter of state's traditional powers in this area. I
    mean, I am somebody that has read the 10th Amendment. But even
    when I support legislation like this, state to curb the tax
    authority such as the Cell Tax Fairness Act, I want to make
    sure we do it right and that the relief is targeted in a way
    that it should be.
        So therefore I look forward to hearing from all of the
    witnesses today to determine the scope of the problem and
    whether H.R. 4175, which I have some concerns about, the
    approach that it takes, but I am open to hearing a better
    approach, but I believe it is a sufficiently limited remedy to
    the problem to warrant my support.
        And so I yield back the balance of my time, Mr. Chairman.
        Mr. Cohen. Thank you, Mr. Franks. Isn't the 10th Amendment,
    is that the one ``Thou shalt honor thy state and local
    government?''
        Mr. Franks. That is close enough for a Democrat.
    [Laughter.]
        Mr. Cohen. Yes, I think I am getting them--somehow I am
    getting them confused, yes. And now--thank you for your
    statement.
        I am now pleased to introduce the first panel for today's
    hearing. First thanks to all the witnesses who are willing to
    participate in today's hearing. If Mr. Scott has a statement we
    will enter it in the record without objection.
        Without objection written statements will be placed in the
    record. We ask that you limit your remarks to 5 minutes. We
    have the lighting system which Mr. Boucher is most familiar
    with, and then we will have the questioning period.
        Our first witness is Congressman Rich Boucher of Virginia's
    9th Congressional District. Representative Boucher is in his
    14th term in the United States House of Representatives. He is
    a Member of the House Judiciary Committee, serving on the
    Courts and Competition Policy Subcommittee.
        He sits on House Energy and Commerce Committee, serving on
    two Subcommittees, Communications, Technology and the Internet
    of which he is the Chairman, as well as the Energy and
    Environment Committee.
        He is the author of H.R. 4175, the ``End Discriminatory
    State Taxes for Automobile Renters Act of 2009'' which he
    introduced on December 2, 2009. He is one of the most cerebral
    Members of our Congress, and his district touches Tennessee.
    And for all those good reasons, I thank him for his testimony
    and recognize him now for his statement.

     TESTIMONY OF THE HONORABLE RICK BOUCHER, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF VIRGINIA

        Mr. Boucher. Well, thank you very much Chairman Cohen. I
    also intend to invite you to come campaign for me this fall. I
    appreciate those very kind remarks. And I thank you and Ranking
    Member Franks and other Members of the Subcommittee for your
    attention today to H.R. 4175, which is designed to prohibit
    prospectively discriminatory car rental taxes imposed by state
    and local governments.
        I am joined in the co-sponsorship of the bill by 10 Members
    of the House, including Mr. Jordan and Mr. Issa, who are
    Members of this Subcommittee. Today, special car rental taxes
    have been enacted by 43 states and by the District of Columbia.
    In 1976 there was one such tax. Today there are 115.
        Localities have found that car rental taxes are an
    attractive means of financing projects that have no direct
    relation to the rental of automobiles. For example, 35 sports
    stadiums have been funded with these discriminatory taxes, a
    performing arts center and a culinary institute have been
    funded by car rental taxes.
        And these taxes carry a huge social cost. They fall
    disproportionately on minority households. Nationwide, minority
    households bear 52 percent of the burden of these taxes. In the
    state of Georgia, for example, minority households constitute
    12 percent of the population, but they bear 27 percent of the
    car rental tax burden.
        And these are not taxes that are simply imposed on non-
    residents who are traveling through the state, as the Chairman
    indicated during his opening statement. The bulk of car rentals
    come from neighborhood rental facilities, not from the airport
    located in the various communities.
        These taxes also drive up insurance costs. Since a large
    portion of car rentals are temporary replacement vehicles that
    are rented by insurance companies while an automobile that was
    involved in an accident is being repaired.
        A recent study has shown that these taxes also
    significantly depress new car sales, perhaps by as much as 12
    percent. These social costs are simply far too high. The taxes
    frequently fund projects that are unrelated to car renting. And
    they are discriminatory, since similar taxes are not imposed
    upon the leasing of other tangible personal property in the
    various locality.
        Our legislation prohibits the imposition of new
    discriminatory car rental taxes by states and localities, while
    allowing to remain in effect those taxes that had been enacted
    prior to December the 2nd, 2009. That was the date upon which
    our legislation was introduced, serving notice to localities
    nationwide, that Congress would now be considering respectively
    prohibiting these taxes.
        The taxes that were in effect on December 2, 2009 can
    remain in effect as long as they are not changed, they do not
    lapse, and the rate of those taxes does not increase. We
    inserted the grandfathering provision to acknowledge that
    localities have financed projects in anticipation of these tax
    receipts, and we are carefully avoiding disrupting the
    financing flows that enable those projects to be paid for.
        I would note that the Congress has previously adopted
    similar kinds of legislation that prohibit the imposition of
    local taxes on bus, airplane and train transportation. This is
    very much a corollary and an analogy to those previous
    congressional enactments, and I think very appropriate as a
    complement to them.
        I would note, Mr. Chairman, and Members, that our
    legislation has been endorsed by a large number of
    organizations, including The National Consumers League, The
    National Urban League, The United Autoworkers and the major
    United States auto manufacturing companies.
        I want to thank all of these endorsing organizations and
    the 10 individual Members of the House, who have co-sponsored
    the bill. And I thank you, Chairman Cohen, Mr. Franks and other
    Members of the Subcommittee, for your attention to the merits
    of our legislation today. Thank you for having me here as your
    witness.
        [The prepared statement of Mr. Boucher follows:]

               Prepared Statement of the Honorable Rick Boucher,
            a Representative in Congress from the State of Virginia

                                   __________

        Mr. Cohen. Thank you for your testimony, and for
    introducing the bill, Mr. Boucher. I didn't realize that I was
    not a sponsor of it.
        And maybe, I don't know, maybe it was because of the idea
    of being impartial for the hearing, but we have since the
    hearing has started, we are going to become a sponsor. I think
    it is good legislation, and I appreciate you for bringing it to
    the Committee. I do not have questions for Mr. Boucher.
        Mr. Franks, do you have questions?
        Mr. Franks. Not for Mr. Boucher. We are going to let him
    off the hook.
        Mr. Cohen. Mr. Scott, though, has been waiting to grill
    you. [Laughter.]
        Mr. Scott, you are recognized.
        Mr. Scott. I would like to thank Mr. Boucher for his
    testimony.
        Mr. Boucher. Thank you very much
        Mr. Cohen. The Virginia gentleman that he is. We thank you
    for your testimony and--excuse me, Mr. Jordan, would you like
    to grill?
        Mr. Jordan. No, I am----
        Mr. Cohen. You are a sponsor.
        Mr. Jordan. [Off mike.]
        Mr. Cohen. Well, that ends Congressman Boucher's day on the
    Hill. [Laughter.]
        Mr. Boucher. Thank you very much, Mr. Chairman.
        Mr. Cohen. We thank you for your testimony and for bringing
    the bill.
        Our next panel, are we ready for the next panel? Will the
    next panel of witnesses be seated? Thanks to each of you for
    participating in today's hearing. We had the instructions. We
    didn't do them when Mr. Boucher was there.
        We have got a 5-minute system, lighting system up front,
    and when the light is green that means you have started or at
    least it means that counsel has turned on your light. And it
    means you have got 4 minutes until it turns to yellow. And when
    it turns to yellow that means you have got 1 minute left. And
    when it turns to red that means you should be finished.
        After you finish your statements, each Member of the
    Committee will have five minutes to ask you questions, and we
    will have the same lighting system and can submit the questions
    to you later to ask you to respond to. But we ask you for that.
        First witness will be Mr. Ray Wagner, vice president of
    Enterprise Holdings. He oversees Enterprise's government and
    legislative agenda. Prior to joining Enterprise in 1995, he
    served in the cabinet of two governors, as director of revenue
    in Illinois and Missouri, conflicted in St. Louis on a certain
    football game, that occurs there annually.
        In 2003, Mr. Wagner was unanimously confirmed by the United
    States Senate to serve as a member of the IRS Oversight Board.
    On March 17, 2005, he was unanimously confirmed for his second
    term to the board and served as the chairman of that board for
    2 years.
        He was a municipal judge in the city of Ballwin, Missouri,
    a position he held from April 1999 to May of 2005. And an
    attorney in private practice, in the areas of securities,
    municipal finance, banking, corporate and tax law. Thank you
    Mr. Wagner, you may begin your testimony. And are you in the
    Big 10, the Big 12 or----

    TESTIMONY OF RAYMOND T. WAGNER, JR., VICE PRESIDENT, GOVERNMENT
             AND PUBLIC AFFAIRS, ENTERPRISE HOLDINGS, INC.

        Mr. Wagner. I haven't read this morning's newspaper, so I
    don't know---- [Laughter.]
        Mr. Cohen. Moving around. Thank you, sir.
        Mr. Wagner. Mr. Chairman, Ranking Member Franks, Members of
    the Subcommittee. Again, my name is Ray Wagner----
        Mr. Cohen. I think it might be. I didn't tell you about the
    microphone. You have got to punch it, is the light on?
        Mr. Wagner. Is it on? Right? Better?
        Mr. Cohen. Better, better, I guess it is.
        Mr. Wagner. Can you hear me?
        Mr. Cohen. Yes, I can.
        Mr. Wagner. Now it seems to be working, okay. Mr. Chairman,
    Ranking Member Franks, Members of the Subcommittee, again, my
    name is Ray Wagner, and I am the vice president of government
    and public affairs for Enterprise Holdings.
        As the Chairman suggested, I served as director of revenue
    of two states, Missouri and Illinois. I believe in a fair
    system of taxes, and in the Federal system of government.
        I am testifying in support of the bipartisan bill, that
    serves both of these American ideals of fairness and federalism
    on behalf of a coalition that spans in spectrum from Grover
    Norquist to the UAW.
        The End Discriminatory State Taxes on Automobile Act,
    EDSTAR, seeks to address an increasing propensity of state and
    local governments to target, or in other words discriminate
    against rental car consumers.
        Prohibiting such taxation, which burns interstate commerce,
    is a valid use of congressional power under the commerce
    clause. With the 4R Act and similar laws, Congress, as our
    sponsor suggested, has prevented discriminatory taxes on
    railroads, trucks, buses and airlines.
        Rental cars equally cross state lines and when they don't,
    renters drive on federally funded highways, roads, bridges and
    tunnels. Make no mistake, rental cars are a part of interstate
    commerce.
        Yes, the rental car industry accepts fair taxation, but
    that doesn't mean our consumers should pay at a higher rate.
    These taxes are simply wrong and millions of Americans
    understand why. Have you ever rented a car that you thought
    would be at a great rate of $35 a day only to find out that the
    bill wound up being close to $45 or greater?
        Part of that increase may be the result of the
    discriminatory taxes imposed by state and local governments.
    These extra taxes come on top of the broad base of general
    taxes, registration fees, personal property taxes, gasoline
    taxes, airport user fees--every other tax already imposed on
    all car owners and users.
        We don't object to the broad base of taxes. EDSTAR will not
    affect these. We do, however, object to taxes that specifically
    target, unfairly discriminate and single out rental car
    customers. Let me be clear. The coalition is not asking for any
    sort of handout.
        We are merely asking local governments to take their hands
    out of our customer's pockets. Let me explain what else EDSTAR
    will and will not do. It will only prohibit state and local
    governments from enacting future discriminatory rental car
    taxes.
        It will not affect any of the 118 existing rental car taxes
    or the projects they fund, including the sport stadiums. Local
    officials find these taxes so seductive because many believe
    car rental taxes export the tax burden to non-resident voters.
        They also believe that all car renters can afford these
    extra taxes. Rental cars do, indeed, affect airport renters,
    but there is a whole segment of renters who go largely
    unnoticed. Contrary to popular belief, as has been suggested,
    most rental car companies are not business travelers.
        The majority rent cars as individuals. Some are renting to
    replace their own car while it is repaired, while others rent
    because they don't own a car at all. And of course, many rent
    cars for vacation or other special occasions.
        Singling out renters is unfair because there is rarely a
    connection between renting a car and the purpose for which the
    tax was enacted. Not only that, but these taxes are regressive.
    They have proportionally greater impact upon people of modest
    means than they do on the wealthy, many of whom are reimbursed
    for business expense.
        They also impact minorities disproportionately. As the
    respected economics firm The Brattle Group reported in a recent
    study, minorities are approximately 75 percent more likely to
    rent than Whites.
        The African Americans are 12 percent of the population.
    They account for 27 percent of the rentals, car demand, and pay
    28 percent of rental car taxes. That is one reason why the
    National Urban League is concerned with this issue.
        Finally, these taxes even impact those who don't rent cars
    at all. As Congressman Boucher indicated, auto insurance
    companies are forced to pay rental taxes through the claims
    process, and these costs are passed along to all policyholders
    whether they have ever rented a car or not.
        These taxes are not only unfair to consumers they are bad
    for the economy. They suppress the demand for rental cars. That
    leads to slower growth and fewer job opportunities in the
    industry. That also results in reduced purchases of new cars by
    the rental car companies that ordinarily account for 1.2
    million vehicles or 12 to 15 percent of all vehicles sold in
    the country.
        And that means fewer jobs for the American autoworkers at a
    time when their industry is struggling in this recession.
    Unfair and harmful as these taxes are, many public officials
    like them because they are so easy to impose.
        While aimed at those from out of town who don't vote, these
    taxes are more likely to hurt economically vulnerable
    households with little political influence. This is a modern
    day version of taxation without representation or maybe again,
    as Senator Russell Long said it best, ``Don't tax me, don't tax
    thee, tax that fellow behind the tree.''
        Well, let me close by adding working families depend upon
    the health of the auto industry and the entire economy. Working
    families deserve the opportunity to rent cars for special
    occasions and urgent emergencies. And finally, working families
    demand and deserve fairness in our tax system.
        Thank you for the opportunity to speak for those families
    and for that fellow behind the tree.
        [The prepared statement of Mr. Wagner follows:]

                  Prepared Statement of Raymond T. Wagner, Jr.

                                   __________
        Mr. Cohen. Thank you for remembering Senator Long's quote,
    which you might hear again today. Our next witness is Mr.
    Timothy Firestine, chief CAO from Montgomery County, Maryland,
    appointed to that position November 2006.
        Prior to that, he was the county's director of Finance for
    15 years. Twelve years of management positions in the Office of
    Management Budget and before coming to Montgomery County, he
    was in Allegheny County, Pennsylvania in the Comptroller's
    office, currently a member of the Executive Board of the
    National Government Finance Officers Association and vice chair
    of its Committee on Debt Management.
        He is a member of District of Columbia Water and Sewer
    Authority--excuse me--where he currently serves as vice chair,
    plus an adjunct professor at the University of Maryland
    Graduate School of Public Policy where he taught public
    finance.
        Thank you, Mr. Firestine.

     TESTIMONY OF TIMOTHY FIRESTINE, CHIEF ADMINISTRATIVE OFFICER,
     MONTGOMERY COUNTY, MARYLAND, ON BEHALF OF THE NATIONAL LEAGUE
       OF CITIES, THE NATIONAL ASSOCIATION OF COUNTIES, THE U.S.
       CONFERENCE OF MAYORS, AND THE GOVERNMENT FINANCE OFFICERS
                              ASSOCIATION

        Mr. Firestine. Good morning, Chairman Cohen, Ranking Member
    Franks, and other Members of the Subcommittee on Commercial and
    Administrative Law. I am Tim Firestine, Chief Administrative
    Officer of Montgomery County, Maryland.
        On behalf of the National League of Cities, the National
    Association of Counties, U.S. Conference for Mayors and the
    Government Finance Officers Association, I am pleased to
    testify on H.R. 4175. As our organizations have noted in the
    past, we respectfully oppose H.R. 4175.
        This legislation would preempt the ability of states and
    localities to make their own determinations regarding the
    appropriate taxation of businesses within their communities. It
    also represents an unwarranted Federal intrusion into the long
    recognized authority of local and state governments to make tax
    classifications, and opens the door to unprecedented Federal
    control and oversight of local and state tax authorities.
        Over the past year, states and local governments have
    witnesses a parade of various industries coming forward to
    request that Congress preempt state and local government taxing
    authority of their particular industry, first the
    telecommunications industry, then the hotel industry, and today
    the rental car industry.
        Our associations have always maintained that any industry's
    plea for federally mandated tax favoritism would open the door
    to other industries asking Congress for similar special
    exemptions for protections from state and local taxing
    authorities.
        That is what we are now witnessing. H.R. 4175 and other
    legislation of its kind pose a dire threat, not merely to state
    and local tax revenues, but to the entire existence of
    independent state and local taxation authorities and our system
    of federalism.
        The requirements of H.R. 4175 would, if enacted, open the
    door to unchecked Federal oversight, and rewriting of all state
    and local tax laws and classifications. Since state and local
    governments must balance their budgets, such a federalization
    of state and local tax classifications would not lower total
    taxes paid by state and local taxpayers, but rather just shift
    the tax burden to other types of taxes.
        Moreover, the ability to tailor taxing authority at the
    local level is extremely important. For example, Washington
    State permits all counties to impose a 1 percent tax on car
    rentals, yet only four counties in the state impose such tax.
        H.R. 4175 departs radically from long standing principles
    of federalism, and sets an unprecedented and dangerous new
    standard of Federal intervention into state and local
    government tax classifications.
        If the standard for Federal intervention into supposedly
    discriminatory state and local taxation becomes that every
    economic sector in every service has to be taxed at the same
    rate when measured against other sectors, then there would be
    no limit at all to Federal intervention in state and local tax
    classifications.
        Indeed, such a standard for discriminatory state and local
    taxes would mean contrary to long-established precedent, that
    the Federal Government has the power to preempt all state and
    local tax classifications and to impose a federally mandated
    state and local tax code of only a single tax rate for all
    businesses. That would mean the end of state and local tax
    classification authority.
        Furthermore, Congress adds insult to injury by entertaining
    any such measures during today's difficult economic times, for
    states continue to struggle to balance their budgets and often
    do so by dramatically decreasing the assistance they provide to
    local government.
        It is arguable that the worst recession since the Great
    Depression is not time for Congress to limit any local or state
    tax receipts. State and local government budgets face billions
    of budgetary shortfalls over the next couple of years.
        In most places, the local response to shrinking revenue has
    consisted of a round of unfortunate, but unavoidable, layoffs,
    service cut backs, and in some cases, increasing fees and
    taxes.
        It is clear that Congress recognizes the struggle of states
    and localities, which have included a surge in unemployment as
    well as an increase in individuals and families dependencies on
    municipal services and responded with the adoption of the
    American Recovery and Reinvestment Act.
        But it is ironic that at the same time Congress supports
    and enacted such measures, that it would be considering
    legislation such as H.R. 4175, which would provide states and
    localities far less flexibility to make decisions to enable our
    leaders to confront the economic crisis and ultimately assist
    in providing services such as police, fire, education, housing
    and job training.
        We urge Congress not to give with one hand and take away
    with the other. Finally, I would like to briefly discuss
    briefly what is done with the tax dollars state and local
    governments collect from rental car companies and how they are
    used to enhance the quality of life in hometowns, small and
    large.
        As noted in the written testimony, communities across the
    country depend on these taxes to provide a variety of
    improvements in their state, counties and cities, including
    ones that help the rental car companies through capital
    improvements to airport facilities and tourism initiatives that
    serve to bring more customers to them.
        There are other examples of the funds being used for a
    variety of government services and programs including public
    safety programs and road and transit improvements. In Maryland,
    the state collects an 11-1/2 percent tax on rental cars, which
    is estimated to bring in $52 million in fiscal year 2011.
        Our statutes dictate that these funds go into the state's
    Chesapeake Bay Trust Fund and the Transportation Trust Fund.
    Montgomery County benefits from both of these initiatives. The
    Bay Trust Fund pays for projects that control storm water run-
    off.
        And monies from the Transportation Trust Fund helps fund a
    variety of projects in the county including resurfacing and
    maintaining roads, replacing and installing streetlights,
    implementing pedestrian safety measures, snow removal and
    various transit initiatives throughout our community. Thank
    you.
        [The prepared statement of Mr. Firestine follows:]

                    Prepared Statement of Timothy Firestine

                                   __________

        Mr. Cohen. Thank you, Mr. Firestine.
        Ms. Sally Greenberg, Executive Director of the National
    Consumers League--not to be confused with the National Football
    League--her focus in NCL, four key priorities, fraud, child
    labor, health care and the NCL's Team Consumer Education and
    Financial Literacy Program.
        She came to the National Consumers League from the
    Consumers Union, where she worked from 1997 until 2007 on auto
    safety, product safety, civil justice reform, including keeping
    the justice system open, accessible and accountable for all
    consumers, advocated for enhanced auto and product safety,
    intellectual property, securities reform and investor
    protections and civil justice reform.
        She had worked at the U.S. Department of Justice Foreign
    Claims Settlement Commission and first served as a time as
    Eastern States Civil Rights Counsel for the Anti-Defamation
    League in Boston.
        Ms. Greenberg, thank you, and we begin your testimony.

      TESTIMONY OF SALLY GREENBERG, EXECUTIVE DIRECTOR, NATIONAL
                            CONSUMERS LEAGUE

        Ms. Greenberg. Thank you so much, Chairman Cohen, Ranking
    Member Franks, Members of the Subcommittee. Thanks for the
    opportunity to appear before you today in support of H.R. 4175,
    a bill entitled the ``End Discriminatory State Taxes for
    Automobile Renters Act of 2009.''
        I am, indeed, an Executive Director of the National
    Consumers League. We are the Nation's oldest consumer
    organization founded in 1899 with a mission of protecting the
    interest of both workers and consumers in creating a more fair
    marketplace for both.
        Mr. Chairman, today's consumers feel that many of their
    transactions they are nickeled and dimed, whether it is on
    their cell phone bills, late fees and finance charges on credit
    and debit cards, bogus convenience fees slapped on the tickets
    for live entertainment performances or extra fees imposed on
    just about everything else we consumers do when purchasing
    goods and services.
        Indeed, a good example is the recent survey from ``Consumer
    Reports'' that finds that travelers hate--the fees that
    travelers hate most are the extra fees they have to pay for
    luggage and airline ticket fees.
        The National Consumers League feels consumer's pain and
    unfortunately most of the time we have little power to change
    these fees. However, today we are here to support legislation
    that says enough. Consumers need to fight back and H.R. 4175
    will prospectively bar discriminatory car rental taxes which
    are really added fees imposed by states and localities.
        As of February 2010, 43 states and the District of Columbia
    have imposed 118 excise taxes on car rentals. This is eight
    times the number of these taxes that existed in 1990. My
    grandmother would have said the word goniff comes to mind.
        Rental car taxes tend to pay for entertainment items like
    stadiums, performing art centers, culinary institutes, and not
    for vital services like schools, libraries, hospitals or
    services to the elderly.
        Industry research indicates that rental car consumers spent
    more than $7.5 billion in taxes to fund pet projects of elected
    officials. A perfect example is the situation unfolding right
    now in my hometown of Minneapolis.
        The Minnesota Vikings already have the Metrodome. It is a
    beautiful indoor stadium right in the middle of downtown
    Minneapolis. But Zygmunt Wilf, the Vikings billionaire owner,
    he wants another one.
        He wants one with a retractable roof, and he wants
    consumers who rent cars to help pay for it. So the state is now
    considering levying a 2.5 percent tax on rental cars to finance
    a new billion dollar stadium.
        More than half of those who rent cars in Minnesota are
    residents of the state. But to add insult to injury, Minnesota
    residents are already paying a special 6.2 percent excise tax
    on car rentals, a tax that was adopted to pay for the cost to
    the state of trying to attract the Super Bowl. That tax was
    supposed to expire in 2005 but it was extended even though the
    revenue it raised far exceeded its original purpose.
        Tourists are also affected by these pervasive fees.
    Tourists may be easier to tax as non-constituents but fees on
    tourists are also spiraling out of control. According to the
    New York Times, taxes and other fees such as vehicle licensing
    fees or high levels of excise taxes raise the average rental
    bill 28 percent at airport locations.
        In addition, from my professional vantage point as head of
    a nonprofit overseeing a staff of 14, when we travel or have
    meetings locally and don't have access to a car, we have to
    rent cars. I see the bills come in and often the excise fees
    and the sales taxes together represent a hefty percentage of
    the entire bill.
        These added costs hurt nonprofit organizations like mine
    that operate on modest bills but are vitally important to civil
    society. Unfortunately, politicians who pass these taxes are
    operating on several false assumptions.
        First, there is the misconception that the vast majority of
    people who rent cars are from outside the state or locality.
    Second, there is the misperception that most consumers who rent
    cars are either businesses who won't feel the extra charge or
    affluent consumers who won't notice an extra $10 or $15 on a
    car rental.
        First, the first myth is that people who rent cars are from
    out of state. If local officials gave some thought to the idea,
    they would understand that many people who don't own a car
    because they can't afford one might rent when they have a
    special need.
        And the other misperception is that consumers that rent
    cars for these reasons are not affluent out-of-town business
    people that state and local legislators seem to believe rent
    most of the cars. Far from it, and they need affordable rental
    car options.
        There have been several studies mentioned. One is the
    Brattle Group Study that Ray Wagner mentioned. It shows the
    revenues in 2004 from car rentals were about $17.6 billion.
    Half of that was from home-city rentals.
        Another study that was commissioned by the Brookings
    Institution analyzed the impact of a $4 per day rental car tax
    in Kansas City. The researchers found that piling taxes onto
    car rental customers is both inefficient because it distorts
    choices about modes of transportation, and it is inequitable.
    Communities that are already taxing car rental customers might
    want to take a look at their long-term strategy.
        So in conclusion, Mr. Chairman, with an eight-fold increase
    in taxes on rental cars since 1990, it seems clear that the
    piling on of these excise taxes has gotten out of hand. NCL
    understands the importance of citizens paying his or her share
    of taxes for schools, libraries, roadways, and for clean water
    and other very worthy projects.
        But when rental car customers are asked to pay for stadiums
    or art centers and taxes imposed seem to have no limits, it is
    time to say enough.
        I appreciate the opportunity to testify and look forward to
    your questions.
        [The prepared statement of Ms. Greenberg follows:]

                     Prepared Statement of Sally Greenberg

                                   __________
        Mr. Cohen. Thank you, Ms. Greenberg, and we will now have
    the questioning session, and I will recognize myself for 5
    minutes of questioning. Mr. Firestine, you have got the
    government perspective. Taxes--if you have a property tax,
    everybody pays at the same rate. Sales tax, pay at the same
    rate.
        Why do people that rent cars pay higher taxes than those
    people proportionately than those that own cars? Why should
    there be a special tax on folks that rent the car and use it
    for a week or short term than those who have it for a year?
    There is not such a tax on renters of apartments per month or
    necessarily. Why is that? Is that fair?
        Mr. Firestine. Okay, I am glad to respond to that. And
    again, our emphasis here is that state, you know, tax policy is
    a decision made at the local and state level by elected
    officials. There is a whole combination of factors that go into
    deciding what is the right portfolio of taxes to have to
    support services.
        Once you have decided what you are going to offer whether
    it is education, all the community needs that are trying to be
    met through these local governments, let us start with the
    property tax.
        Even though everybody may pay the same rate, the burden is
    going to be different from taxpayer to taxpayer. There are tax
    credits that are included. It is based on the assessment of the
    house. Likewise with----
        Mr. Cohen. But the assessment, there is a correlation in
    your ability to pay because there is ability to purchase. So if
    you can purchase a $100,000 house, your assessment is at that
    rate or if you purchase a million dollar house your assessment
    is at that rate. There is some correlation.
        What is the correlation with having a car for a week that
    you rent as distinct from having a car for a year that you own?
        Mr. Firestine. Well, again, I would----
        Mr. Cohen. And I am not asking--and I appreciate your
    knowledge, and your acumen and your professorial experience,
    but I am asking you this question not as a government witness,
    to give me a government answer, because obviously I know that.
    I am asking you as a person who considers justice and fairness
    and the philosophy professor to give me the answer.
        Mr. Firestine. And that is what I am saying. I would say,
    you know, from a tax policy perspective, you know, since it is
    a consumption tax like the sales tax that you mentioned
    earlier, you can choose whether or not you want to participate
    in that service, whether you----
        Mr. Cohen. You can choose--if you travel to Los Angeles,
    you can say I am going to be in Los Angeles and instead of
    renting a car I am going to walk?
        Mr. Firestine. No, you could----
        Mr. Cohen. You could. You would have a very weird trip.
        Mr. Firestine. You have other alternatives. You could
    take----
        Mr. Cohen. What are your alternatives? A cab?
        Mr. Firestine. A cab.
        Mr. Cohen. That is insane in Los Angeles. Nobody takes the
    cab. I tried to find one last week. They don't have cabs. It is
    not New York.
        Mr. Firestine. But again, I--my point is these are local
    taxes decisions. There are other taxes out there that are very
    similar to the rental car taxes. I mean, cell phone taxes were
    mentioned. They are a primary source of funds for Montgomery
    County. We tax cell phones. There are tobacco taxes in the
    state of Maryland----
        Mr. Cohen. But you tax cell phones based on having a cell
    phone, not on having it for a week. You are really not getting
    to the point that I think is germane. You discriminate and
    charge people that rent cars a large tax, and what is the
    basis?
        What is the rational connection? What is the nexus? Is
    there one or is it just we trust and put in our elected
    officials total discretion?
        Mr. Firestine. Again, I think that is my point is that, you
    know, that is a local elected official's decision to make in
    terms of how much to tax.
        Mr. Cohen. I got you. I got you.
        Ms. Greenberg, your grandmother's philosophy, we have heard
    from people that want to have us protect them from Internet
    access taxes, from--from hotel industry wants us to talk about
    taxes, and satellite television. They all claim that these
    taxes are goniff taxes, too. To paraphrase your grandmother,
    why should this goniff be different from all other goniffs?
        Ms. Greenberg. Well, you know, I said in my statement that
    consumers feel like they are getting nickel and dimed, and they
    are. This bill is an opportunity to say no and say enough with
    regard to this particular tax.
        I mean, I would be right there fighting a lot of the taxes
    and fees that are imposed on consumers which we as consumers
    don't have any understanding where that money goes. So here we
    have a bill that gives us an opportunity----
        Mr. Cohen. So you have got a forum?
        Ms. Greenberg [continuing]. To articulate some of the----
        Mr. Cohen. Right.
        Ms. Greenberg [continuing]. Concerns we have about this fee
    but I don't love the fees that I have to pay on my cell phone
    bill either.
        Mr. Cohen. I got you. Ms. Greenberg or Mr. Wagner, do you
    see any connection, any nexus, logical nexus other than this is
    an opportunity to grab some money on having this extra tax on
    rental car users? Nobody sees a nexus?
        Mr. Wagner. Chairman, I will speak to that. On the--I think
    you have captured the essence of the issue here about fairness.
    There truly is no nexus typically between the taxes imposed and
    the purpose for which the rental itself.
        The issue here is generally that the taxpayer or the taxing
    entity sees these as easy targets; that these people are non-
    voting residents who typically live out of town. They are taxes
    have the end impact of discouraging travel, punishing the low
    and moderate income individuals and throwing a wrench into the
    American auto industry.
        Mr. Cohen. Thank you, Mr. Wagner.
        My 5 minutes have expired, and I will now recognize Mr.
    Franks.
        Mr. Franks. Well, thank you, Mr. Chairman. You know, it is
    always a challenge when you are dealing with competing
    interests like this. I think it was Fred Bastiat said that, you
    know, ``Government is that great fiction through which everyone
    endeavors to live at the expense of everyone else.''
        And one of the challenges we are having to deal with here
    is one that some of the founders had to deal with as well. You
    know, when they had the Articles of Incorporation they needed
    some kind of a mechanism to create interstate commerce. And
    they knew that if they just let, you know, it would be a free-
    for-all. That it would end up being kind of a disaster.
        And yet I am afraid that some of my liberal colleagues
    would, if they decided to mandate that all Members of Congress
    had flying saucers, that they would reference the commerce
    clause in the Constitution as a basis for giving them that
    authority.
        So it is kind of a, you know, kind of a tug-of-war here
    between the commerce clause rightfully interpreted and the
    second--I am sorry, the 10th Amendment.
        And so, you know, I am convinced here that the real issue
    is discriminatory. What is a discriminatory tax? And if there
    is a discriminatory tax, then it seems to be something that
    needs to be addressed. And that is my own position that there
    is evidence that there is a discriminatory tax burden here and
    that that is why we should address it.
        Now I am not sure, as I said in my opening statement, that
    this bill is the best way to do that. And I am hoping that
    somehow it will catalyze a discussion that will make sense to
    everyone, you know, at least every reasonable person and that
    we can deal with that.
        So I guess with that, Mr. Wagner, I would like to start
    with you. What is the dollar burden on rental car companies and
    consumers of these discriminatory taxes? Just give us a little
    kind of a picture of it.
        Mr. Wagner. The collective amount of dollars that have been
    raised is typically over $7 billion a year. That is the amount
    of revenue that is being collected from the travelers that fly
    into a particular town to rent cars or from in-state, in-
    community renters.
        Mr. Franks. Well, I know the big challenge is
    distinguishing between an ordinary taxation and a
    discriminatory taxation regime. How would you make an effort to
    make that distinction between ordinary taxation and
    discriminatory taxation?
        Mr. Wagner. Well, I think when the tax that is applied to a
    single group of individuals that is not generally based upon or
    imposed upon a broad base of taxpayers, a tax that is
    disproportionate and falls upon a segment of the community
    would be discriminatory.
        And I think these rental taxes are very clearly
    discriminatory when you look at the other modes of
    transportation in interstate commerce which have been regulated
    and addressed already by Congress. With the 4R Act, the
    railroads were protected, the buses were protected, trains.
        And I think at one point in time states targeted bus
    tickets and interstate bus travelers and Congress stepped in to
    protect them because those taxes were discriminatory in that
    mode of transportation.
        And I think this is a similar situation where a particular
    group of taxpayers has been identified and has been targeted
    and discriminated against with a specific tax that the rest of
    the population and the rest of the community does not need to
    pay.
        Mr. Franks. Well, Mr. Firestine, I might ask you the same
    question. How would you distinguish between a discriminatory
    tax and--and an ordinary tax? Or would you make that
    distinction given some of your fundamental predicate?
        Mr. Firestine. Well, I think it is a good question because,
    you know, I think discrimination, trying to define that, would
    be a challenge. And I guess my point is those are issues that
    are best left to local elected officials to try to come up with
    a group of taxes on--and where the burden falls relative to
    thinking about this issue of discrimination.
        Certainly local and state officials don't want to tax a
    business out existence and to the extent a business is needed
    for--I mean, rental car companies do provide jobs in our
    community so certainly we are not going to do something that
    would jeopardize the ability to have those jobs continue in our
    community.
        Likewise, it is instrumental because people won't take a
    cab, they would rather have a rental car, and it is critical to
    people coming to the state of Maryland because they want to be
    able to drive around and see the Bay and certainly you are
    going to set your tax policy so that it doesn't preclude those
    rental car companies from doing business in the state of
    Maryland.
        But again, you know, those are local decisions that are
    made in that context. You know, in terms of nexus too, if I
    could just make a point about that, I have heard several times
    the comment that, you know, they are being used for stadiums
    and other things.
        First of all, it is a tax. It is not a fee, so it--to me,
    since it is a tax, it can be utilized for various purposes.
    Tobacco taxes, for example, go to the general fund and aren't
    necessarily used for smoking cessation programs. Cell phone
    taxes aren't used to build cell phone towers, things like that.
    So I do think those, again, are local decisions for local
    elected officials to make.
        Mr. Franks. Well thank you. The Chairman is indulging me
    here very briefly. Mr. Wagner, assuming the Congress agrees
    with you and passes H.R. 4175, how do you distinguish between
    rental cars and other businesses that may come looking for what
    might be considered preferential tax treatment from Congress?
        Mr. Wagner. Well, again, rental car companies, the rental
    car industry, is uniquely a form of interstate commerce
    transportation very similar to buses, trains, automobiles. We,
    by virtue of the fact that the automobiles are transported and
    drive across state lines, that they use and travel upon
    federally-funded highways, I think that does set them apart.
    And much the way that buses, trains, and airplanes were taken
    care of.
        Mr. Franks. Mr. Chairman, it seems like one of the key
    problems here is that much of the tax burden falls on those
    without a local vote and that is one of the challenges. So
    thank you for the extra time.
        Mr. Cohen. Thank you. Since I gave you an extra minute, I
    will take the privilege to distinguish your last remark. I
    think that it falls on those that have the appearance of not
    having a vote but the reality from the testimony which we found
    which was news to me is it really falls on the people who have
    a vote. It is just they don't realize it or think about it.
        And so that is--when I voted for those taxes, I thought
    about, well, they use the stadium. They go to the convention
    center. But when I realized that most of the people in fact
    were local residents who would have a fender bender or some
    other problem with their car, then it does fall and you just
    don't think about it per se.
        With that, Mr. Scott of Virginia is recognized.
        Mr. Scott. Thank you. Mr. Wagner, can you respond to the
    question I think Mr. Franks raised the question on what the
    Federal role in all this is. Can you respond to that?
        Mr. Wagner. Well, I think under the commerce clause,
    Representative, Congress is charged to regulate interstate
    commerce. And I think with respect to this notion that Congress
    at this very moment is considering stimulus packages and relief
    for local governments, this bill in no way conflicts with that
    but in essence complements that.
        The stimulus money, the other revenues that are provided to
    local governments generally are from broad-based taxes. These
    particular rental car taxes are not from broad-based imposition
    of----
        Mr. Scott. Well, the question was what the Federal role is
    in all of this because in stimulus package a lot of, I mean,
    states tax a lot of things and I mean we have had other
    hearings on that various question because they start crossing
    state lines and every state whose line is crossed wants to get
    a little piece of it. Where is the Federal role for deciding
    how the tax would be imposed?
        Mr. Wagner. Well the authority for Congress to become
    involved centers around the commerce clause of the
    Constitution, interstate commerce. And I think again that the
    rental car tax is this Congress or Congress has already
    suggested and incorporated into legislation in the past that
    the rental car industry is a part of the interstate commerce
    system. And so that is the authority by which the courts have
    been----
        Mr. Scott. Well, yes, I know we have the authority but I
    mean what is the rationale to dip into this tax and not every
    other local decision?
        Ms. Greenberg, do you want to have a comment on that?
        Ms. Greenberg. Well, I think I--in terms of----
        Mr. Scott. Not the policy----
        Ms. Greenberg. Right.
        Mr. Scott [continuing]. Whether it is a good idea or bad
    idea but----
        Ms. Greenberg. Why this?
        Mr. Scott [continuing]. Why--why should the Federal
    Government dip into this decision?
        Ms. Greenberg. Partly I think it is there has been this
    explosion in rental car taxes beyond what you see in other
    areas. And the bill does a pretty good job, I think, of
    defining what discriminatory means. We have really seen an
    explosion, and as we have said in our testimony and other
    witnesses----
        Mr. Scott. Well, is that not a local decision rather than a
    Federal decision?
        Ms. Greenberg. Well, there comes a point at which they are
    really gouging consumers, so I am speaking from a consumer
    perspective and----
        Mr. Scott. That is the policy.
        Ms. Greenberg. Right and we, you know, I see this as an
    opportunity for consumers to fight back because there is, you
    know, there is misperceptions that were really taxing out-of-
    staters.
        We are doing that with these taxes but we are also taxing
    primarily people who live within the state. Many of those
    people are lower income people who can't afford to own a car.
        Mr. Scott. Mr. Firestine mentioned the question--I think
    somebody mentioned the idea that the taxes have nothing to do
    with the purpose to which the revenues are put. And I think Mr.
    Firestine said that that is irrelevant. Anyone want comment on
    that?
        Mr. Firestine. Well, I--a couple things. I am saying that
    some cases it is relevant but it is a local policy decision. I
    mentioned in Maryland----
        Mr. Scott. Well I mean there is no--what you are saying
    there is no requirement that you--that the taxes----
        Mr. Firestine. There is no----
        Mr. Scott [continuing]. Go to any particular use.
        Mr. Firestine. No.
        Mr. Scott. Sometimes it is convenient and sometimes it is
    easier to raise the tax. But from a Federal perspective what
    difference does that make? That they are not using it for
    something related to rent a car?
        Mr. Firestine. And I guess that is my point, I don't think
    it has to be used even though for example in Maryland it is.
        Mr. Scott. Well let us let the others comment on that.
        Mr. Firestine. I am sorry.
        Mr. Scott. Okay.
        Ms. Greenberg, is that a relevant factor from the Federal
    perspective?
        Ms. Greenberg. I think for consumers who see their bills
    almost double, and I have been in that position. I have been
    thinking about this issue since I was at Consumers Union, and
    now I am in the National Consumers League.
        You know, you go in and rent a car and it--you might get a
    great deal but you have got, you know, 30 or 40 percent added
    on to the rate of the car. You feel like you are--okay, well if
    you are paying for something related to this rental, that is
    one thing, if it is going to build the stadium for a
    billionaire in Minneapolis because he needs a new toy, those
    are the kinds of things that drive consumers crazy.
        Mr. Scott. Okay. Well that is the policy question and let
    me--we have taxes at airports like we charge taxes, a little
    fee to pick somebody up at the airport, parking fees and things
    like that. Why would this be different if we add on a little
    fee at the airport?
        Mr. Wagner. Well, I will speak to that, Representative.
    First of all, I think this is an appropriate place for Congress
    to steer the course. You know, these taxes are proliferating at
    a rapid rate, eightfold rate since 1990 as was stated earlier.
        So it is appropriate for Congress to get involved in here.
    State and local governments are not acting in the best interest
    of interstate travelers and out-of-state travelers or for that
    matter, the other individuals who are saddled with these taxes,
    nickeled and dimed with these taxes at the local level.
        The industry is suffering a death by a thousand nicks in
    many respects with respect to the taxes that are being imposed.
        Your question about concession fees that are paid at the
    airport, those in essence are user fees. Those in essence
    constitute the taxes that are--or fees that are levied upon
    rental car companies for the privilege of operating at an
    airport, which are entirely different from a tax imposed on a
    rental car company that goes into some other purpose,
    completely unrelated to the rental car industry or as was
    suggested perhaps into some general revenue account.
        So a user fee, a personal property tax fee, a gasoline tax,
    a vehicle licensing fee, a registration fee, all of those are
    appropriate fees that relate to the rental car business and to
    the cost of--of that car operating in the community.
        Mr. Scott. So if a locality called it a fee rather than a
    tax, it would be different?
        Mr. Wagner. No, I don't think it would necessarily be
    different because many of the fees that I outlined are indeed
    taxes, personal property taxes, that sort of thing.
        But if it is a tax which is aimed to generate revenues for
    a purpose wholly unrelated to the car rental business, then it
    would be a discriminatory tax, and it would be appropriate for
    Congress to step in to intervene in protection of the
    interstate commerce system, like it has done with the buses and
    the airplanes and the railroads.
        Mr. Scott. I think Mr. Firestine wanted to comment on----
        Mr. Cohen. You may go on if you would like, Mr. Scott.
        Mr. Firestine. Let me comment, just----
        Mr. Cohen. You are recognized.
        Mr. Firestine. Generally a fee does require an access to
    some service being provided, whereas the tax doesn't. And
    second, just to comment about, if I may, on the discrimination
    issue, it does appear there are legal remedies that somebody
    could pursue if they feel they are being discriminated relative
    to a tax.
        Montgomery County just instituted a new carbon tax on a
    facility in the county. The power plant and certainly the owner
    of the plant is going to seek whatever legal remedy they can
    get and then the courts will help to decide. So in addition to
    elected officials making decisions, there certainly are other
    mechanisms in place if it truly is a discriminatory tax.
        Mr. Cohen. Thank you.
        Ms. Chu?
        Mr. Johnson, I don't how to really--Ms. Chu is recognized,
    the lady from California, very knowledgeable about these taxes.
        Ms. Chu. Thank you so much, Mr. Chair.
        I was a city council member and mayor of a city near Los
    Angeles for a period of 13 years. And it was a city that was
    popular with tourists, so I know what extra impacts tourists
    have on a city. We did not have a car rental tax, but I could
    see why our city would impose such a thing.
        And in fact I have a situation at the LAX airport, who have
    raised concerns with your bill as it is currently written
    because it would prohibit a customer facility charge, which is
    clearly an airport and travel-related fee.
        Currently LAX is using these fees to finance the design,
    consolidation and maintenance of a consolidated rental car
    facility. Currently, the rental car facilities are
    decentralized and they are spread out within a three mile
    radius of the airport.
        And LAX passengers wishing to rent or return a car must use
    one of several car shuttles to reach their destination. And as
    a result, there are 800,000 shuttle trips during the year
    causing significant traffic congestion.
        So the city of Los Angeles is seeking to address these
    concerns through the construction of a consolidated rental car
    facility, which would be the largest such facility in the
    United States, and it would significantly reduce the numbers of
    shuttle trips and their impact on nearby communities.
        But is dependent on this fee and this charge and without
    this charge, LAX and dozens of other airports throughout the
    country would not be able to build these facilities.
        So Mr. Wagner, you argue that these taxes and fees are
    often used to pay for unrelated services. However, a number of
    airports including my hometown airport, LAX, uses customer
    facility charges to pay for the construction of these
    consolidated rental car facilities.
        And as it is currently written, I understand that this bill
    would eliminate these fees as well. So are you saying that
    these fees are inappropriate and should be forbidden by
    Congress?
        Mr. Wagner. Thank you, Representative Chu. I respectfully
    suggest that perhaps the LAX officials misread the bill, too,
    because in--the bill intend to carve out and protect
    consolidated facility type fees.
        In my remarks and in my comments a few moments ago, I
    suggested that user fees, taxes, fees that related directly to
    the automobile industry or the airport are indeed protective of
    the industry and the coalition has no objection to those.
        In fact, I think if you look at H.R. 4175 on page five, it
    expressly says the term ``tax'' does not include any charge
    imposed by state or locality with respect to a concession
    agreement at a federally assisted airport.
        And so we would have no objection to those types of taxes,
    nor do we have any objections to the other taxes and fees which
    are imposed on all owners of cars and all users of cars.
        Ms. Chu. Well as the former mayor of a city that had a lot
    of tourism, which had tourists drive through the streets and
    use our facilities, I would wonder if local government might be
    in a better position to determine these things? And therefore I
    would like to ask Mr. Firestine why is it that local government
    could be in a better position to make such a determination?
        Mr. Firestine. Well, I think for the reasons you just
    stated. And that has been the point of our testimony is these
    are local decisions, state decisions that should be left up to
    local officials.
        You know, balancing the tax burden within the communities
    to take into account factors such as if it is something that
    you want to do to promote tourism and you feel that a high tax
    would discourage that, then certainly that is a local decision.
        And if the local community doesn't feel that you are making
    the right decision, they can elect somebody else to do that.
    But I do think that those are local matters.
        Ms. Chu. In fact, the money might not be used directly for
    a rental car facility consolidation such as the example, I used
    but it could be for other impacts and are there examples where
    it is used for other types of impact?
        Mr. Firestine. Yes, in my testimony I noted in Maryland for
    example, there is an 11-1/2 percent tax on rental cars. It is
    split. Basically it goes into the Transportation Trust Fund and
    into the Chesapeake Bay Trust Fund.
        So part of the initiative is--part of the money is
    distributed to the counties in the state of Maryland to pay for
    road maintenance, replacing and installing street lights,
    pedestrian safety initiative, things like that.
        But it also goes to help support Bay initiatives, reducing
    run-offs into the Bay. You know, the Bay is related to tourism
    in the state of Maryland and certainly people come there to
    participate in Bay activities.
        These monies would help clean up the Bay, although I don't
    believe, as I said earlier, it necessarily is required that
    there be a nexus between the tax and the services provided.
        Ms. Chu. And what impact would this legislation have on
    state and local revenues?
        Mr. Firestine. Well, again, at a time when we are
    scrambling to identify any revenues possible to keep our
    budgets balanced because we do have to stay balanced, as I
    indicated this is another tool in the toolbox, and it is
    another place to go to manage that.
        Property taxes at the local level are the primary source of
    revenue. We all know what has happened to--home values have
    declined, therefore, you know, making that a difficult tax to
    be a productive tax. So we do look to other taxes.
        I did indicate in Montgomery County for example, we have
    instituted a higher cell phone tax. We instituted a carbon tax
    on a power plant, so we do look at other options that are out
    there relative to the total burden within the community.
        Ms. Chu. Thank you. I yield back.
        Mr. Cohen. Ms. Chu.
        And now Mr. Johnson, the distinguished Subcommittee
    Chairman recognized from Georgia.
        Mr. Johnson. Thank you, Mr. Chairman.
        I don't know I am suspicious about the statistics that I
    have heard that would lend credence to the theory that car
    rental taxes are primarily born by minority consumers. Take a
    place like Miami for instance, heavily--a tourist haven. I
    would suppose that you would have more car rental facilities
    there than you would in another part of Florida that did not
    see a lot of tourists.
        A place like Atlanta, convention industry being a major
    source of car rental demand, so I question the stats that have
    been cited. And I have not been here for the full hearing but I
    have kind of read over the hearing materials.
        The statistics that have been cited to support the notion
    that these car rental taxes are borne primarily by minorities,
    distinguish between locations where tourism and business
    activities were the primary source of the revenues? Did they
    cut out those kinds of locations in compiling the statistics?
        Mr. Wagner. Well, Representative, the study was conducted
    by the Brattle Group, and it did take a number of communities
    and analyzed the rental revenues and----
        Mr. Johnson. So it did not take all 16,000 car rental
    locations into effect?
        Mr. Wagner. No, sir it did not study the entire country and
    16,000, you know, offices across the country, but rather took a
    representative sample in Georgia and other communities, looked
    at industry statistics, applied a number of other data points,
    census data and so on to it and engaged in a statistical
    analysis.
        I would be very happy to share with you that study and meet
    with you about it to talk further about the particulars if you
    would be interested.
        Mr. Johnson. What group commissioned the study?
        Mr. Wagner. The study was commissioned by Enterprise
    Holdings in consultation with members of the coalition that
    existed at the time that the study was undertaken.
        Mr. Johnson. Is that connected to Enterprise Leasing at
    all?
        Mr. Wagner. Yes. Yes, sir. Yes, sir, Enterprise Holdings is
    the holding company for Enterprise Rent-A-Car and Alamo and
    National.
        Mr. Johnson. Yes, is there any--does anyone think that if
    the local and state abilities to apply a tax to car rental
    activity would result in a reduction of the price of car
    rentals to consumers?
        Ms. Greenberg. If I can respond to that. I think consumers
    would be greatly relieved to get a quote on a car rental and
    have the final bill be far closer than it is today.
        When you rent a car, you can, you know, you can get a car
    for $25 or $35 a day and end up with a $60 bill. And that added
    amount is not anticipated by many consumers, and it ends up
    being taxes and fees and things that you have, you know, no
    real ability to predict.
        Mr. Johnson. So are you saying that there are some car
    rental taxes that are 100 percent or, you know 75 percent on
    the tax--I mean on the rental cars?
        Ms. Greenberg. When you add up the local tax, the state
    tax, various fees for delivery, there is sometimes convenience
    fees. I may be getting the names of the fees wrong, but I rent
    cars all the time and I am absolutely astounded by how much
    those fees add up onto the actual, you know, the base price of
    the car.
        Mr. Johnson. But you are not going to suggest or you are
    not suggesting that local and state taxes would cause a 100
    percent jump in the amount of the car rental?
        Ms. Greenberg. Well, I have rented a car for as low as $25
    and seen $15 worth of taxes added on, so it is not 100 percent
    but it can get up there to a hefty percentage. And that is I
    think something that is distressing to consumers.
        Mr. Wagner. Representative, I might also add from our
    information and our studies and our practice in the industry,
    it is clear to us that rental car prices are very price
    sensitive, very tax sensitive. And with the continued piling on
    of these sorts of taxes, again as I said earlier, the industry
    in essence is suffering a death by a thousand nicks.
        These taxes do pile up. Most recently in the State of
    Wisconsin, an $18 transaction tax was passed and authorized. In
    Kansas City there is a $4 per day tax, and I can go on and on
    with a list of taxes that really do reach that point where the
    consumer says, ``I will take a cab.'' as was suggested earlier,
    at which point that eliminates choices, reduces choices.
        And is--really discourages travel in particular, and
    punishes the low and moderate income renters, who maybe don't
    have that extra $18, who don't have that $4 a day. They don't
    have that $10 a day.
        So a tax in and of itself may--is a significant factor. But
    the taxes that we are talking about are the discriminatory
    taxes that are added on top of all of the other broad base of
    taxes which the industry and the rental car company pays, which
    include personal property taxes, certainly general sales taxes,
    local sales and use type taxes, registration fees and so on and
    so forth.
        So in essence, it is the same rationale that prompted
    Congress into saying enough is enough with additional
    discriminatory taxes being placed on bus tickets in 1995 when
    Oklahoma in that particular case that led to the congressional
    activity imposed a tax on bus tickets.
        And consumers were already burdened with other taxes that
    existed on those tickets and Congress said it was the proper
    place for Congress to step in and regulate interstate commerce.
        There is the rental car industry I think by all accounts
    through the court cases, through congressional action and so on
    is clearly a part of the interstate commerce system. And it is
    appropriate for Congress to take a good look at this issue and
    say enough is enough with respect to the piling on of these
    taxes on behalf of consumers, which again adversely impact the
    entire automobile industry.
        Mr. Johnson. Well, I certainly agree that Congress
    maintains and in fact should do exactly what we are doing
    today, which is to take a look at these rates. I am just kind
    of seeking addition information.
        The majority of cars rented in America are to business and
    tourist travelers or to people who have had an accident and
    need temporary rental or somebody who just wants to rent a car
    for the weekend or something like that?
        You know, what makes up the most significant share of the
    market, business and tourism or consumers, just regular, every
    day Joe Blow consumers?
        Mr. Wagner. If you group business and tourism together that
    would be the largest segment. The notion that rentals happen
    for business purposes predominantly or exclusively that is not
    true, business rentals comprise of less than half of the
    overall rental business by 46 percent.
        Local, the home city market that I think you are alluding
    to is generally 54 percent, but part of that same 54 percent is
    indeed business travel but otherwise it is leisure, replacement
    business, renting a car to replace another car because your car
    is in the garage, having warranty work, that sort of thing
    done.
        So a significant portion, a dominant portion is indeed home
    city, local, non-business, non-vacation type rentals.
        Mr. Johnson. Okay, and my last question, Mr. Chairman, if I
    may. Gosh, and I had it right there on the tip of my tongue.
    Yes, what are state and local governments to do when all of the
    fingers of revenue raising for purposes such as the police,
    fire, ambulance, roads and drainage, parks and rec, just all of
    the things that local government is responsible for.
        And if we cut off all of the fingers on both hands of local
    and state governments to address those concerns through things
    like car rental taxes, what happens to--what is the impact on
    state and local governments, local governments in particular?
        Mr. Firestine. If I could answer that, as I indicated in my
    testimony, you know, times have gotten tough, and we have
    started to run out of options. We do look for wherever we can
    to create diversification in our tax structure. But as property
    tax revenues have declined across the country, as income tax
    revenues have declined, we have looked for other alternatives.
        I would also like to comment if I can for a minute, on the
    issue of minority and low income participation in rental car
    usage. You know, coming from a diverse county in this region, I
    have to say that if 54 percent of the use of rental cars is
    local, home city usage.
        Quite frankly minorities and low income folks in Montgomery
    County are not using rental cars, they are using mass transit.
    If they drop their car off for a repair, if they have a car,
    they hop on the bus to go to work.
        So if the majority of it is home city, then it seems to me,
    you know, to make this argument that has a disproportionate
    impact on minorities than low income is not appropriate.
        Second, in an urban area, again from a policy perspective,
    the local elected officials might be trying to encourage the
    use of mass transit. And to that extent, how they tax
    automobile rentals may play into that local policy decision, to
    discourage use of vehicles to the extent they are available.
        Mr. Johnson. Thank you.
        Mr. Wagner. Representative, if I might----
        Mr. Cohen. Thank you, Mr. Johnson.
        Let me ask you this, if--Mr. Firestine, what is the tax in,
    say, Baltimore. I go to rent a car in Baltimore, how much is
    the rental car tax?
        Mr. Firestine. Eleven and a half percent.
        Mr. Cohen. Eleven and a half percent.
        Mr. Firestine. That is the state tax, yes on----
        Mr. Cohen. And that is on the total commercial transaction,
    and it is in addition to any other fees and taxes, right?
        Mr. Firestine. That is correct.
        Mr. Cohen. All right. So let us ask--then I got there and
    the car is give or take 50 bucks, and I am there for 3 days, so
    my contribution to Baltimore is--and what is the county?
        Mr. Firestine. It would either be Baltimore City or
    Baltimore County but----
        Mr. Cohen. It is the same county, so my----
        Mr. Firestine [continuing]. It would go into the state
    trust fund and then be distributed to the counties. But you are
    talking what 15, 16 bucks over that 3-day period.
        Mr. Cohen. Right. How does--but again and I know you--
    basically you said that other fees are supposed to have a nexus
    and taxes and don't have to. But logically shouldn't they?
        I mean do I really cause $16 more cost to the state of
    Maryland than somebody who is driving their car 365, 52 weeks a
    year, in which case you could raise taxes on the registration
    fees to deter people from owning cars and going to mass transit
    too. But do I really contribute $16 more use of the roads than
    somebody else or anything else?
        Mr. Firestine. And again, that is my point about the
    relationship between a tax and a fee. I mean if you are a
    property taxpayer in Montgomery County but you don't have kids
    in the school system, you are going to complain that why do I
    pay property taxes? So to the extent you are collecting more
    than you actually----
        Mr. Cohen. You could, but of course having kids in school
    helps everybody. An educated society is going to have more
    productivity, create more jobs, less crime. I am a single guy.
    I benefit from public schools because if we didn't have public
    schools, I am more likely to be the victim of crime.
        I am more likely to have a community that doesn't have
    educated, trained people to have jobs and productivity and
    culture and blah, blah, blah. I don't buy that, but I cannot
    see that--I don't think works----
        Mr. Firestine. But again----
        Mr. Cohen [continuing]. With the rental car situation. I
    don't--the 16 bucks, where does that cost?
        Mr. Firestine [continuing]. And if that $16 bucks goes
    toward transit initiatives, that helps everybody. It----
        Mr. Cohen. Right but why should I pay for it? Why should
    the person who rents a car pay for it and not the person who
    just drives the car?
        Mr. Firestine. Again, I think those are all questions we
    have about how taxes and what the impact is of this.
        Mr. Cohen. So what you are basically saying is we--in our
    system we allow the local governments, the state governments to
    do things that we can't explain rationally. It couldn't be fees
    because there is no nexus, but that they do because they think
    it is for the good of their constituencies.
        Mr. Firestine. Well, I think there is a rationale behind
    all of our tax policy and as I said earlier, you get elected to
    make those decisions at the local level. And if folks don't
    like the way you made those decisions, they can un-elect you.
        Mr. Cohen. But what if the people who are affected by it
    are the people that are from out of town?
        Mr. Firestine. But we just heard----
        Mr. Cohen. That you can't vote.
        Mr. Firestine [continuing]. Fifty-four percent of rental
    car usage in the home city.
        Mr. Cohen. Yes, but those people don't expect to have to
    rent a car. Nobody expects to have an automobile accident.
    Those are the lotteries of life and those are the people that
    have to go rent the car.
        Some people plan on it and go, ``Oh, I am going to drive to
    Philly and I am--''
        But for most people it is something they don't foresee. So
    when that tax comes about they don't think ``I am going to be
    renting a car because I am going to have a wreck in 2 weeks.''
        Mr. Firestine. And I would offer up in that case most
    likely your rental car costs are paid for by your insurance
    company. That is what you have insurance for.
        Mr. Cohen. So and because of that all your rates go up and
    you pay more, and so as long as you pass along it is okay. You
    have got a tough job. You have done a good job. I am not going
    to grill you any longer.
        Mr. Wagner, what if these taxes were all required to go to
    things like airport fees, facilities that Ms. Chu mentioned or
    toward convention and visitor's centers and/or stadia that do
    attract people that would oftentimes need rental cars and even
    though if we have the 54 percent argument, would that make it
    more palatable or still outside the----
        Mr. Wagner. Well, to the extent that they did go to those
    types of facilities, or consolidated facilities, airport
    terminals and so and so forth then the need to raise taxes
    higher would go down because the cost of those facilities would
    be considerably less.
        It would be the industry has no problem with paying a fair
    amount of taxes for a consolidated facility or airport rental
    car purposes. But the notion is the tax is above and beyond
    that the taxes needed to underwrite those facilities to pay for
    purposes or projects unrelated to the taxes is where the
    problem lies.
        Mr. Cohen. And you said that there is an exemption in the
    bill for the type of facility at LAX that they are coming up
    with. Is there exemptions for any other type of facility or is
    it just the ones that become the major homes of rental cars?
        Mr. Wagner. The bill is not intended to apply to any
    project related to rental cars, operation rental facility
    operations. Again it would not in any way touch personal
    property tax assessed against rental cars or all car owners,
    consolidated facility type fees, registration fees and so on.
    So the bill only applies to those taxes that are levied for
    unrelated purposes.
        Mr. Cohen. Thank you.
        Ms. Greenberg, do you have any last things for consumers? I
    will give you the last statement.
        Ms. Greenberg. Well one thing that I think needs to be said
    is that these taxes are regressive taxes. And if the statistics
    from the Brattle Group study is that 26 percent of the car
    rentals and 27 percent of excise taxes are generated by African
    Americans and 13 percent generated by Hispanics, these are
    regressive taxes.
        And if, you know, our thinking is if local governments need
    to raise revenue, we understand they do. And I said in my
    testimony I believe in tax policy and I think it is perfectly
    legitimate to pay for hospitals, schools, playgrounds and
    things that benefit the general public.
        But if you want to raise taxes, you should do so in a
    progressive tax system that doesn't fall so heavily on those
    who can least afford it.
        And also consumers don't want to pay for stadiums that
    billionaires want to build because they want another additional
    toy when they already have--the Minneapolis example, when they,
    you know, why should people who rent cars be paying for things
    that ought to be paid for by people who can well afford to do
    so?
        And we see a lot of that in these taxes, so thank you for
    the opportunity to share my thoughts on those issues.
        Mr. Cohen. I want to thank all of the panelists. And I want
    to thank the Committee Members who attended and participated.
    The witnesses all did a good job defending their positions and
    advocating.
        Without objection, Members will have 5 legislative days to
    submit any additional written questions which we will forward
    to the witnesses and ask you to answer as promptly as possible,
    and it will be part of the record.
        Without objection, the record will remain open for 5
    legislative days for the submission of any other additional
    materials. Thank you everyone for their time and patience. The
    hearing on the Subcommittee on Commercial and Administrative
    law is adjourned.
        [Whereupon, at 12:35 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

                                  ----------

                   Material Submitted for the Hearing Record

    Prepared Statement of the Honorable John Conyers, Jr., a Representative
      in Congress from the State of Michigan, Chairman, Committee on the
     Judiciary, and Member, Subcommittee on Commercial and Administrative
                                      Law

        Response to Post-Hearing Questions from Raymond T. Wagner, Jr.,
      Vice President, Government and Public Affairs, Enterprise Holdings,
                                      Inc.

     Response to Post-Hearing Questions from Mr. Timothy Firestine, Chief
     Administrative Officer, Montgomery County, Maryland, on behalf of the
     National League of Cities, the National Association of Counties, the
        U.S. Conference of Mayors, and the Government Finance Officers
                                  Association

           Response to Post-Hearing Questions from Sally Greenberg,
                 Executive Director, National Consumers League

            Prepared Statement of Dr. Kevin Neels, The Battle Group

           Prepared Statement of the Federation of Tax Administrator

                   Prepared Statement of Stephen J. Collins,
                   American Automotive Policy (AAPC) Council

                    Prepared Statement of Jeffrey Friedman,
                        Sutherland, Asbill & Brennan LLP

        Letter from Grover Norquist, President, Americans for Tax Reform

    Letter from Richard D. Broome, Sr. Vice President, Corporate Affairs &
                     Communications, The Hertz Corporation

                 Letter from Chris Russo, President and Chair,
                    American Society of Travel Agents (ASTA)

          Letter from Joe B. Huddleston, L.L.D., Executive Director,
                        Multistate Tax Commission (MTC)

    Prepared Statement of the Truck Renting and Leasing Association (TRALA)

     Letter from Alan Reuther, Legislative Director, International Union,
        United Automobile, Aerospace & Agricultural Implement Works of
                                  America--UAW