    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

       END DISCRIMINATORY STATE TAXES FOR AUTOMOBILE RENTERS ACT OF 2011

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

                                    HEARING

                                   BEFORE THE

                       SUBCOMMITTEE ON COURTS, COMMERCIAL
                             AND ADMINISTRATIVE LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 2469

                                   __________

                                FEBRUARY 1, 2012

                                   __________

                               Serial No. 112-100

                                   __________

             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

    72-691 PDF                       WASHINGTON : 2012

    For sale by the Superintendent of Documents, U.S. Government Printing
    Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
    DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
    Washington, DC 20402-0001

                           COMMITTEE ON THE JUDICIARY

                          LAMAR SMITH, Texas, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        HOWARD L. BERMAN, California
    HOWARD COBLE, North Carolina         JERROLD NADLER, New York
    ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
    BOB GOODLATTE, Virginia                  Virginia
    DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
    STEVE CHABOT, Ohio                   ZOE LOFGREN, California
    DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
    MIKE PENCE, Indiana                  MAXINE WATERS, California
    J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
    STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
    TRENT FRANKS, Arizona                  Georgia
    LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
    JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
    TED POE, Texas                       JUDY CHU, California
    JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
    TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
    TOM MARINO, Pennsylvania             JARED POLIS, Colorado
    TREY GOWDY, South Carolina
    DENNIS ROSS, Florida
    SANDY ADAMS, Florida
    BEN QUAYLE, Arizona
    MARK AMODEI, Nevada

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

           Subcommittee on Courts, Commercial and Administrative Law

                     HOWARD COBLE, North Carolina, Chairman

                   TREY GOWDY, South Carolina, Vice-Chairman

    ELTON GALLEGLY, California           STEVE COHEN, Tennessee
    TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
    DENNIS ROSS, Florida                   Georgia
    BEN QUAYLE, Arizona                  MELVIN L. WATT, North Carolina
                                         JARED POLIS, Colorado

                          Daniel Flores, Chief Counsel

                          James Park, Minority Counsel

                                C O N T E N T S

                                  ----------

                                FEBRUARY 1, 2012

                                                                       Page

                                    THE BILL

    H.R. 2469, the ``End Discriminatory State Taxes for Automobile
      Renters Act of 2011''..........................................     3

                               OPENING STATEMENTS

    The Honorable Howard Coble, a Representative in Congress from the
      State of North Carolina, and Chairman, Subcommittee on Courts,
      Commercial and Administrative Law..............................     1

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

                                   WITNESSES

    Sally Greenberg, Executive Director, National Consumers League
      Oral Testimony.................................................    14
      Prepared Statement.............................................    17

    Brian Frederick, Executive Director, National Sports Fan
      Coalition
      Oral Testimony.................................................    26
      Prepared Statement.............................................    28

    Raymond A. Warren, Deputy Commissioner of Revenue and Legal
      Counsel, Arlington, VA, on behalf of the National Association
      of Counties, the National League of Cities, the United States
      Conference of Mayors, and the Government Finance Officers
      Association
      Oral Testimony.................................................    36
      Prepared Statement.............................................    38

    Michael W. McCormick, Executive Director, Global Business Travel
      Association
      Oral Testimony.................................................    43
      Prepared Statement.............................................    45

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Letter from Josh Nassar, Legislative Director, International
      Union, United Automobile, Aerospace & Agricultural Implement
      Workers of America (UAW).......................................    54

    Letter from Thomas M. James, President and CEO, Truck Renting and
      Leasing Association (TRALA)....................................    56

    Prepared Statement of the Federation of Tax Administrators, and
      Government Finance Officers Association........................    58

    Letter from Bob Barton, President, the American Car Rental
      Association (ACRA).............................................    61

    Prepared Statement of Matt Blunt, President of the American
      Automotive Policy Council (AAPC)...............................    63

    Prepared Statement of the Interactive Travel Services Association
      (ITSA), and the Business Travel Coalition (BTC)................    66

    Letter from Richard D. Broome, Senior Vice President, Corporate
      Affairs & Communications, The Hertz Corporation................    70

    Letter from Charles M. Loveless, Director of Legislation, the
      American Federation of State, County and Municipal Employees
      (AFSCME).......................................................    72

    Prepared Statement of Jeffrey Friedman, Sutherland, Asbill &
      Brennan LLP....................................................    73

       END DISCRIMINATORY STATE TAXES FOR AUTOMOBILE RENTERS ACT OF 2011

                                  ----------

                          WEDNESDAY, FEBRUARY 1, 2012

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

        The Subcommittee met, pursuant to call, at 1:34 p.m., in
    room 2141, Rayburn Office Building, the Honorable Howard Coble
    (Chairman of the Subcommittee) presiding.
        Present: Representatives Coble, Gowdy, Quayle, Cohen,
    Johnson, Polis
        Staff present: (Majority) Daniel Flores, Subcommittee Chief
    Counsel; Travis Norton, Counsel; Johnny Mautz, Counsel; Ashley
    Lewis, Clerk; (Minority) James Park, Subcommittee Chief
    Counsel; and Norberto Salinas, Counsel.
        Mr. Coble. The Subcommittee will come to order. Good to
    have you all with us today.
        This Congress, our Subcommittee has considered a number of
    bills addressing taxes that appear to be unfair or inefficient.
    While several iterations of H.R. 2469 have been included in
    past sessions of Congress, car rental taxes are another area of
    our tax law that have been routinely criticized on Capitol
    Hill.
        Ranking Member Cohen, my good friend from Tennessee, and
    our Republican colleague from Missouri, Sam Graves, have taken
    on the task of trying to address these criticisms by
    introducing H.R. 2469. Hopefully, today's hearing will shed
    some light on this issue and on H.R. 2469.
        State and local governments impose excise taxes on car
    rentals for a number of purposes. While these taxes are
    explicitly applied to rental vehicles, they undoubtedly raise
    the ire of the car rental industry, and travelers who rely on
    car rentals.
        During the past several years, our office has received
    critical comments about car rental taxes from the car rental
    industry. I expect that witnesses today will further highlight
    these criticisms.
        One issue that could be affected by H.R. 2469, which was
    recently brought to my attention, and creates great concern, is
    the potential impact on local transportation authorities. I
    understand many of these organizations rely upon car rental tax
    revenues. I cannot speak to every variation of--or use of car
    rental revenues, but I can say with certainty that this funding
    is critical for transportation authorities in my district and
    in my state.
        Along these lines, I am very interested in how H.R. 2469
    would affect the ability of jurisdictions to use these taxes to
    fund local transportation authorities. For many years, and
    perhaps you have heard me say it, I have warned that the number
    one issue, in my opinion, plaguing transportation in America is
    vehicular congestion. To the extent these revenues are utilized
    to alleviate congestion, I believe they are being invested
    wisely.
        I appreciate the bipartisan support for H.R. 2469, and look
    forward to the testimony from our witnesses who are here today.
    I apologize to you all for my raspy voice. I have come down
    with my annual winter cold, so bear with me. Even though the
    weather outside is more like April than February.
        [The bill, H.R. 2469, follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Coble. I recognize the distinguished gentleman from
    Tennessee, Mr. Cohen, for an opening statement.
        Mr. Cohen. Thank you. Thank you. Thank you, Mr. Coble. And
    welcome back.
        Mr. Coble. Oh. Thank you, sir.
        Mr. Cohen. It is good to have you back where you belong,
    just like Kotter.
        Mr. Coble. Thank you.
        Mr. Cohen. Yes. Thank you for holding this hearing as well.
        In the 111th Congress, this Subcommittee held a hearing on
    the earlier version of the bill that we consider today, H.R.
    2469, the ``End Discriminatory State Taxes for Automobile
    Renters Act of 2011,'' which I introduced that year. The act
    prohibits future discriminatory state and local taxation of the
    rental of motor vehicles, the business of renting motor
    vehicles, or a motor vehicle rental property. And I am glad
    that Mr. Graves, from Missouri, worked with me on this bill
    this year.
        Importantly, the Act does not apply to discriminatory State
    or local car rental taxes already in effect, as the effective
    date of this bill, and those that have already been authorized
    or those that will be after the effective after--the effective
    date and afterwards. So, it has no impact on current State and
    local taxes.
        In 2010, I noted that States and localities often turn to
    discriminatory taxes on certain goods or services. That is,
    taxes that are higher than the generally applicable sales tax
    in--in the jurisdiction on other types of goods and services.
    This temptation to rely on discriminatory taxation is
    heightened in the case of taxes imposed on rental cars.
        As a former State senator and a county official, I
    understand why States and localities love car rental taxes.
    They seem like a relatively painless way for political
    officials to raise revenue, because of the widespread belief
    that these taxes primarily affect out-of-towners, getting non-
    constituents to pay for local needs. Even though that is wrong,
    it does make it politically more feasible for them.
        State and local officials like to impose discriminatory
    taxes on car rentals, because there is no political
    accountability, they get the money, and they can go to the
    groundbreaking.
        Such thinking reminds me of an old saying that I used to
    hear from Leonard Donovant, of Millington, Tennessee, a fine
    member of the Tennessee State Senate, and a conservative member
    of the Tennessee Senate. He said, ``Don't tax me. Don't tax
    thee. Tax that man behind that tree.'' And, indeed, those are
    the people you are taxing.
        For consumers, discriminatory rental car taxes impose an
    unfair burden on them. Many of our constituents have faced a
    situation where an individual rents a car from a rental car
    company, is told the daily rate would be $25. By the time the
    bill comes due, however, the renter is often shocked to learn
    the actual charges are closer to $40 a day, after these taxes
    are added on.
        Over 1 week's time, that is a difference of $105, from the
    quoted price, to the final bill, enough to persuade many from
    renting a car in the future, or from even traveling in the
    first place. Such an impact on the interstate traveler
    represents an unwarranted burden on interstate commerce by
    local taxing authorities. Worse, the discriminatory State and
    local taxes on car rental for consumers are often used to build
    local sports stadia and convention centers not to benefit car
    rental consumers.
        We also learned during our hearing last Congress that car
    rental taxes may be regressive, because low-income and minority
    individuals end up paying a larger share of car rental taxes,
    relative to their population. This impact is stark.
        In Georgia, in 2008, households making $50,000 a year or
    less paid over $9 million in rental car taxes. Households
    making $25,000 a year or less, roughly the poverty line for a
    family of four, accounted for $3.5 million of that $9 million.
        Additionally, Caucasians who account for two-thirds of
    Georgia's population paid less than half the car rental taxes.
    In contrast, African-Americans, who accounted for just 12
    percent of Georgia's population, generated one-quarter of
    rental car revenues, and shouldered 27 percent of the car
    rental tax burden. Minority groups, as a whole, bore 92 percent
    of the car rental tax burden.
        A broad range of groups have endorsed this legislation,
    including the National Consumers League, the United Auto
    Workers, the Global Business Travel Association, Americans for
    Tax Reform, the National Urban League, and the major automobile
    manufacturers as well.
        More than 117 discriminatory rental car taxes have been
    enacted in 43 States and the District of Columbia. It is time
    Congress put a halt to such taxation, which is discriminatory
    in several ways.
        So, I thank Congressman Graves for joining me in
    introducing the legislation. And I thank my predecessor in the
    Judiciary Committee, and in the House, Rick Boucher, a fine
    gentleman from Virginia, who introduced this bill prior to my
    taking over prime sponsorship. And he was the leader on it for
    quite a while. And I thank Chairman Coble for scheduling this
    hearing. And I thank our witnesses for participating. And I
    urge my colleagues to support this legislation.
        Mr. Coble. I thank you, Mr. Cohen. And we also have on the
    panel today Mr. Gowdy, the distinguished gentleman from South
    Carolina, Mr. Quayle, the distinguished gentleman from Arizona,
    Mr. Polis, the distinguished gentleman from Colorado. Good to
    have you all here as well.
        I am now pleased to introduce our panelists. I will start
    with Sally Greenberg, who serves as the Executive Director of
    the National Consumers League, a position she has held since
    2007. The mission of the NCL is to protect and promote social
    and economic justice for consumers, workers in the United
    States and abroad. Prior to her service at NCL, Ms. Greenberg
    worked at Consumers Union for 10 years on a variety of issues,
    including product liability and food safety issues. Her career
    also included positions at the U.S. Department of Justice and
    the Anti-Defamation League, in Boston.
        Dr. Brian Frederick is the Executive Director of the Sports
    Fan Coalition, a national non-profit organization dedicated to
    advocating issues of importance to sports fans. He's also an
    adjunct professor at Georgetown University, where he teaches
    sports industry management.
        Dr. Frederick earned his Ph.D. from the University of
    Colorado, at Boulder, and his master's degree from UNC, at
    Chapel Hill, North Carolina. He completed his undergraduate
    work at the University of Iowa.
        Bio for Mr. Ray Warren. Mr. Warren is a Deputy Commissioner
    of Revenue for Arlington County, Virginia. His testimony today
    is on behalf of the National Association of Counties, the
    National League of Cities, the United States Conference of
    Mayors, and the Government Finance Officers Association.
        Mr. Warren has been a practicing attorney for 28 years,
    having earned his law degree and undergraduate degree from the
    University of North Carolina. This is North Carolina day, it
    appears. Good to have you all here as well.
        He also served 2 terms in the North Carolina General
    Assembly, and 7 years as a North Carolina Superior Court judge.
    He has taught law classes at UNC, Charlotte, and Marymount
    University, in Arlington.
        As an aside, Mr. Warren, where were you reared? What was
    your home county?
        Mr. Warren. Mecklenburg County.
        Mr. Coble. Pardon?
        Mr. Warren. Mecklenburg County, sir.
        Mr. Coble. Oh. From the big city area.
        Mr. Warren. Absolutely.
        Mr. Coble. Well, good to have you with us, Judge.
        And finally, the bio for Mr. Michael McCormick. Mr.
    McCormick serves as Executive Director of the Global Business
    Travel Association, a position he has held since August 2009.
    GBTA is a leading source for networking, advocacy, and--and
    education for business and government travel managers, buyers,
    and planners.
        Prior to his tenure at GBTA, Mr. McCormick spent more than
    20 years in the travel industry. Mr. McCormick earned his
    bachelor's degree at the University of Notre Dame. Good to have
    you all with us. And I remember you now, Mr. Warren, as a
    Mecklenburger, since you refreshed my memory.
        Folks we will ask you all to keep a sharp lookout on the
    timer. It is on the desk. The light will go from green, to
    yellow, to red. And we try to comply with the 5-minute rule, if
    possible. Nobody will be keel-hauled if you violate it. But if
    you could wrap up when you see that yellow light appear, that
    is your warning that we have 1 minute to go. And Mr. Cohen and
    I will try to practice the 5-minute rule against ourselves as
    well.
        So, Ms. Greenberg, if you will be our leadoff hitter. And
    thank you all for being with us.

      TESTIMONY OF SALLY GREENBERG, EXECUTIVE DIRECTOR, NATIONAL
                            CONSUMERS LEAGUE

        Ms. Greenberg. Well, thank you very much, Congressman. And
    I'm delighted to be here today. Thank you, Ranking Member
    Cohen, and Congressman Polis, and Congressmen Gowdy and Quayle.
    I really appreciate the opportunity to be here to talk to you
    about H.R. 2469. It is the End Discriminatory State Taxes for
    Automobile Renters Act of 2001.
        I am, indeed, the Executive Director of the National
    Consumers League. We are the nation's oldest consumer
    organization, founded in 1899.
        Mr. Chairman, consumers today feel that in many of their
    transactions they are being nickled and dimed constantly. Added
    fees are everywhere. The National Consumers League feels
    consumers' pain. And rental car taxes top the list of the worst
    abusers.
        Don't take it from me. ``Consumer Reports,'' in August
    2010, ran a piece called, ``Fees that Irk Consumers.'' The
    worst case were the fees attached to a rental car. And as
    ``Consumer Reports'' puts it, ``But our hearts really go out to
    a couple who rented a compact car in Boston last summer. They
    paid $444 for 15 days of driving. And then came the rental
    vehicle surcharge, customer facility charge, parking surcharge,
    energy recovery fee, fleet recovery surcharge, concession
    recovery fee, and State tax.'' So, we are here to say, we
    support the legislation, and also to say enough.
        H.R. 2469 will prospectively bar discriminatory car rental
    taxes, which are simply added fees imposed by States and
    localities. Now the bill will grandfather in existing taxes and
    not affect the ability of States and localities to impose
    general taxes that are levied on all citizens or business.
        According to the New York Times, the most common use of
    these rental car excise taxes is to finance sports stadiums and
    convention centers. The ``Times'' noted that at least 35 sports
    stadiums were expected to be financed partly with subsidies
    from car rental taxes.
        As of this time, 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.
        A perfect example is Minneapolis. The Minnesota Vikings
    already have the Metrodome. But the Minnesota Vikings' owner,
    Zigmunt Wilf--I may be pronouncing it wrong. The Vikings'
    billionaire owner, he wants another stadium, with a retractable
    roof. And State lawmakers were asking consumers who rent cars
    to help pay for it with a 2.5 percent tax on rental cars to
    finance this new billion-dollar stadium.
        Interestingly, more than half of those who rent cars in
    Minnesota are residents of the State. So, 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 of the State trying to bring the Super Bowl.
    That tax was supposed to expire in 2005, but it was extended,
    even though the revenue it raised has far exceeded its original
    purpose. Talk about fleecing the consumer.
        In addition, I want to talk for a moment about how
    nonprofit organizations experience the heavy taxes on rental
    cars. I have a staff of 16. When my people travel, or even have
    meetings locally and need transportation, we must often rent
    cars. Receipts from our car rentals over the past year tell the
    tale.
        In September of last year, I rented a car in Minneapolis.
    The base fee was $128. But the following taxes were added on.
    CFC, at $2 a day. $6. APCONGR fee, I have no idea what it was
    for, $14.33. State taxes of $10.86. Vehicle tax, $7.47. Rental
    tax, $9.26. Total, $176. So, 37 percent of the total cost in
    Minneapolis was fees and taxes.
        I have another example in my testimony in renting a car in
    Chicago last year. I also paid 37 percent in total taxes for my
    rental there. My base rental was somewhere around $123. I also
    had no idea, when I paid these fees, what they were for. Nor do
    other consumers. The names of the taxes are indecipherable,
    maybe by design.
        Unfortunately, there are misconceptions about who rents
    cars. There is the myth that those that rent cars are from out
    of state, and, therefore, it is easy to impose taxes on people
    who are just passing through. In fact, a study by the Brattle
    Group said that 54 percent of those who rent cars are actually
    in-state residents.
        This tax falls very heavily on--on African-Americans. They
    generate 26 percent of the rental car revenues, according to
    the same Brattle Group study, and pay 27 percent of the excise
    tax, despite accounting for only 12 percent of the population.
        So, in conclusion, with an 8-fold increase in taxes on
    rental cars since 1990, it seems clear that the multitude of
    fees, taxes, and charges have dramatically inflated the cost of
    renting a car. My organization, the National Consumers League,
    certainly understands the importance of citizens paying their
    fair share of taxes to provide critical services that we all
    rely on, our schools, hospitals, libraries, and roadways. We
    don't--we don't object to paying for those items. But what we
    do object to is paying for sports stadiums and taxes that
    have--that consumers have no idea what the tax is for, let
    alone what it is being used for. So, it is time to say enough
    is enough.
        For those reasons, the National Consumers League is pleased
    to offer our support for H.R. 2469. Thank you very much.
        [The prepared statement of Ms. Greenberg follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Coble. Due to the lady's time has expired, Mr.
    Frederick?
        Dr. Frederick?

      TESTIMONY OF BRIAN FREDERICK, EXECUTIVE DIRECTOR, NATIONAL
                          SPORTS FAN COALITION

        Mr. Frederick. Thank you, Chairman Coble, Ranking Member
    Cohen, Representative Quayle, Representative Polis.
        It is a great honor to speak to you on behalf of Sports
    Fans Coalition, where I am the Executive Director. Sports Fans
    Coalition is the largest non-profit advocacy organization in
    the country for fans. We are a bipartisan organization, founded
    by members of the Clinton and Bush White Houses to give sports
    fans a voice on public policy issues.
        We urge your support on this bill today, because rental car
    taxes are one of the primary ways that sports team owners are
    able to manipulate public--public dollars into private profit.
    Experts across the political spectrum agree that these stadiums
    provide little to no economic benefit for the community, and
    only serve to increase the value of the franchise.
        The rental car taxes that help finance stadiums are assumed
    to be paid by non-residents, but, in fact, more residents rent
    cars than non-residents. Eliminating these excise taxes will
    help shift the responsibility back toward the sports teams'
    owners to privately finance stadiums.
        Mr. Chairman, let me state that I do not wish to sit up
    here and single out the NFL or any particular owner. These
    owners are all playing by the same rules that everybody--
    everyone else is, and the leagues are--are playing by the same
    rules as well.
        But this weekend, the Super Bowl will be played in Lucas
    Oil Stadium, in Indianapolis. The stadium opened in 2008, and
    cost $720 million, of which the public was supposed to pay 87
    percent through taxes on hotels, and food, and a tax on rental
    cars.
        For his part, Indianapolis Colts' owner, Jim Irsay, kicked
    in $100 million, although $48 million of that came from the
    public buying out the Colts' lease on the RCA Dome. So, the
    public share was actually more like 92 percent.
        Irsay and the Colts also receive around $14 million per
    year for advertising in the stadium, $25 million for luxury
    seating, and $6 million for the naming rights of the stadium,
    all while paying nothing in rent.
        Situations not unique to Indianapolis. Last year the Super
    Bowl was played in Cowboy's stadium in Arlington, Texas. That
    stadium opened in 2009, and cost $1.2 billion, of which the
    public paid at least $440 million, or 37 percent, in part,
    through a 5 percent increase in Arlington's car rental tax.
        Several other arenas----
        Mr. Coble. Dr. Frederick, if you would suspend for a
    moment.
        Mr. Frederick. Sure.
        Mr. Coble. I appreciate what you are saying, but this is
    not an NFL operation. Try to confine this to the--to the bill
    at hand.
        Mr. Frederick. Absolutely. I am sorry, Mr. Chairman. My
    point was to give examples of how the public dollars were being
    pushed toward these particular NFL stadiums. I will say that in
    some situations, like in Kansas City, where Kansas City built a
    downtown arena, even though it didn't have a particular team,
    the public ended up spending $276 million, paid for entirely by
    hotel and car rental fees. To this day, 5 years later, they
    still don't have a--a team.
        So, how this plays out for the consumer like me, as--as the
    head of one of the largest sports fans organizations, and
    considering that sports fans are one of the biggest consumer
    groups, if I were to fly home to Kansas this weekend to watch
    the Jay Hawks and the Tigers, renting an economy car at Kansas
    City Airport at a base rate of $11 per day for 3 days, I would
    pay $33 for the car, and $42.84 in tax--taxes and fees. So,
    that is an increase of 129 percent, giving me a total bill of
    $75.84 for a--16 percent of that would be going toward the
    Sprint Center, even though I am not seeing a game there, nor
    are there any actual teams that play there. As a result, I no
    longer rent cars when I return home to Kansas City.
        So, these excise taxes and car rentals enable local
    politicians and stadium supporters to claim the costs of
    building a new--new stadium will be born by out-of-town
    visitors. Indeed, these taxes are often referred to as tourism
    taxes. But while hotel rooms are primarily rented by out-of-
    towners, a June 2010 study, conducted by the Brattle Group,
    found that 54 percent of the total revenues generated from
    car--rental cars were from home city rentals. In other words,
    just over half the cars were rented by local residents.
        As Representative Cohen pointed out, while car rental
    excise taxes may seem like an attractive option for shifting
    the burden of paying for a stadium onto non-residents, in
    truth, residents bear the majority of the burden. So, because
    sports fans are often manipulated into paying for stadiums in
    order to keep their favorite teams in town, and often wind up
    paying these costs through rental car taxes, Sports Fans
    Coalition is pleased to offer our support for H.R. 269. It is
    legislation that is long overdue, and we urge you to support
    it.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Frederick follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Coble. Thank you, Mr. Frederick.
        Mr. Warren?

    TESTIMONY OF RAYMOND A. WARREN, DEPUTY COMMISSIONER OF REVENUE
        AND LEGAL COUNSEL, ARLINGTON, VA, ON BEHALF OF NATIONAL
      ASSOCIATION OF COUNTIES, THE NATIONAL LEAGUE OF CITIES, THE
    UNITED STATES CONFERENCE OF MAYORS, AND THE GOVERNMENT FINANCE
                          OFFICERS ASSOCIATION

        Mr. Warren. Good afternoon, Chairman Coble. Good to see you
    again. Mr. Cohen. Representative Cohen. Representative Polis.
    Thank you for having us here today.
        My name is Ray Warren. I am a Deputy Commissioner of
    Revenue, and legal counsel to the elected commissioner of
    revenue in Arlington, Virginia. She is, in essence, the tax
    assessor.
        I am pleased to submit testimony on behalf of the National
    Association of Counties, the National League of Cities, the
    United States Conference of Mayors, and the Government Finance
    Officers Association. The above organizations respectfully
    oppose H.R. 2469, the ``End Discriminatory State Taxes for
    Automobile Renters Act of 2011,'' for several reasons.
        First, the operative part of the proposed legislation
    provides that no State or locality may levy or collect a
    discriminatory tax on the rental of motor vehicles, the
    business of renting motor vehicles, or motor vehicle rental
    property. The determination that a tax is discriminatory is
    made without any reference to the factors that State and local
    policymakers use to evaluate the local needs and best manner to
    distribute the tax burden. Nor does the determination that the
    tax is discriminatory take into account offsetting exemptions.
        For example, in Virginia, we exempt the inventory of rental
    vehicle companies from what is a fairly significant vehicle
    property tax. As a result, rental car companies do not pay the
    property tax. They are also exempt from the sales tax in
    Virginia. These tradeoffs are not accounted for in the bill,
    and in our case, they are actually sort of favorable to the
    industry.
        The congressional mandate determines that discrimination
    exists by reference to other items of business subject to the
    tax, without evidence of the differences that may exist in
    those items or businesses.
        For example, the bill attempts to compare taxes levied on
    all other commercial and industrial taxpayers, instead of other
    retailers. Yet, common sense dictates that different taxes are
    imposed on retail sales than on manufacturing. Indeed, it is
    unclear if the ordinary sales tax, a mainstay of local finance,
    would be held discriminatory if a similar apples-to-orange test
    was applied to it.
        Second, the vague language of the preemption proposal and
    the lack of an administrative agency that can issue
    interpretative rulings leaves it to the courts to determine
    what the law means. This would lead to expensive litigation and
    result in fiscal and budget uncertainty, at a significant cost
    to taxpayers. It is a very cumbersome process that may result
    in different definitions in different jurisdictions. It will be
    virtually impossible for a uniform set of rules to be developed
    in a reasonable period of time, because of the nature of trial
    court and appellate litigation.
        Thirdly, over the past year, States and local governments
    have witnessed a parade of various industries coming forward to
    request that Congress preempt State and local government taxing
    authority for their particular industry. First, the
    telecommunications industry, the hotel industry, and today, the
    rental car industry.
        The members of the organizations for which I speak have
    always maintained that any industry's plea for Federally
    mandated tax favoritism would open the door to other industries
    asking Congress for similar exemptions. This is what we are now
    witnessing.
        H.R. 2469 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 taxing
    authority in our system of federalism.
        Finally, the fundamental principle of federalism vests
    States and local governments with the responsibility for
    providing services and raising funds needed to pay for these
    services. Fees may be placed on cars rented for airport
    locations that are used for capital improvements and tourism
    campaigns that directly benefit rental car companies
    themselves.
        Rental car taxes are also imposed throughout this country
    by cities, counties, and states, with the proceeds used to pay
    for a variety of governmental services and programs.
        For example, Revere, Massachusetts, uses the rental--the
    revenue from rental car taxes to build police and fire
    stations. Cleveland, Ohio, and Schaumburg, Illinois, divert
    their tax dollars to their general fund, to assist with a host
    of operating expenses. Kenosha, Racine, and Milwaukee Counties,
    in Wisconsin, have used their revenue to expand their commuter
    rail system.
        King County, Washington, uses its revenue to fund sports--
    sports programs that keep youth focused on positive activities
    and off the streets. And finally, my county, Arlington County,
    Virginia, allocates its rental car tax revenue to the general
    fund. Among the services funded by the revenue are street
    maintenance and the provision of police, firefighter, and
    emergency services to Reagan National Airport, the Pentagon,
    Arlington National Cemetery, and other venues frequented by
    rental car users.
        For the above reasons--the above examples illustrate the
    longstanding principle of federalism. And for the above
    reasons, we urge Congress not to encroach upon this important
    principle. So, once again----
        And I see my time is up, and I do want to honor that, Mr.
    Chairman.
        So, once again, I would say, based on federalism, and the
    use of these taxes, and the opportunity for local governments
    to make local decisions, we urge you to oppose this
    legislation.
        [The prepared statement of Mr. Warren follows:]

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                                       __________
        Mr. Coble. Thank you, Mr. Warren.
        Mr. McCormick?

     TESTIMONY OF MICHAEL W. McCORMICK, EXECUTIVE DIRECTOR, GLOBAL
                      BUSINESS TRAVEL ASSOCIATION

        Mr. McCormick. Mr. Chairman, Members of the Committee, on
    behalf off the Global Business Travel Association, I appreciate
    the opportunity to testify in support of H.R. 2469. I also
    appear before you as a member of the Coalition Against Car
    Rental Excise Taxes, which includes consumers, unions, tax
    reformers, auto dealers, auto renters, and manufacturers.
        For years, GBTA and its members have opposed discriminatory
    car rental taxes in their communities. Our members appreciate
    the Committee's willingness to consider an effective uniform
    remedy to discriminatory car taxes.
        First, a snapshot of the industry. The business travel
    sector, which includes transportation, lodging, entertainment,
    meals, meetings, and conventions, is a significant component of
    the U.S. and world economies.
        Domestically, 8 million Americans work and travel in
    tourism-related businesses. In 2011, U.S. spending on business
    travel topped $250 billion. Worldwide, over a trillion dollars
    was spent on business travel and meetings.
        GBTA actively tracks and reports on business travel trends.
    Despite a steep decline during the recession, our latest
    projections show business travel maintaining upward trajectory
    in 2012. We expect corporations to increase their domestic
    travel spend, and increase international travel spend by almost
    8 percent, to $34 billion. This followed a 9 percent growth in
    international travel spend in 2011.
        So, in short, after these increases in the last 3 years,
    you can think of it that we just hit the reset button on
    business travel. We will finally climb our way back to pre-
    recession levels of business travel in 2012.
        And because we know--now know that new jobs follow
    increases in business travel spend, this is good news. The
    reason is simple. When businesses are confident in a growing
    economy, they send their employees on the road to secure even
    more business. The result is increases in the travel sector and
    a positive ripple effect throughout the economy.
        We project that domestic U.S. business travel sector,
    however, to lag international growth. Partly, this is due to
    continuing economic challenges in the United States. However,
    policy, tax, and funding decisions made by Congress can have
    major impacts on the growth of domestic business travel, an
    industry vital to the U.S. economic recovery.
        So, in sort, it is all about creating headwinds, or
    tailwinds, for the economy. And an enactment of H.R. 2469
    represents one of those policy decisions.
        Currently, governments in 43 States and the District of
    Columbia levy 118 different excise taxes on car rentals in
    various jurisdictions. States, cities, and counties can often
    justify the fees by citing budgetary constraints. While
    sometimes true, this phenomenal eight times increase in taxes
    and fees began in 1990, which predates the current downturn.
    And these fees have nothing to do with travel, security, or
    core government operations. The fees are added by local
    politicians, because, as Mr. Cohen stated, they wrongly think
    it only impacts business travelers who are out-of-town voters.
        Business travel buyers pay careful attention to
    discriminatory taxes. Congress does not need to pour over
    economic studies to know that travel demand is elastic. As
    prices increase, and in this case, artificially, travel demand
    decreases.
        So, to be clear, GBTA is not opposed to reasonable taxes or
    service charges that finance the cost associated with travel.
    We understand that a safe efficient transportation
    infrastructure requires funding. But business travelers,
    already a significant driver of revenue, should not be the
    financing source for new sports stadiums, museums, or
    performing art centers, or an attempt to offset new unplanned
    deficits.
        So, in conclusion, increasing business travel costs through
    unfair State and local car rental taxes hurts businesses, their
    travelers, and the economy as a whole.
        Mr. Chairman, thank you for your time to speak in favor of
    the End of Discriminatory State Taxes for Automobile Renters
    Act of 2011. And thank you again for your time and your
    efforts. I look forward to answering any questions.
        [The prepared statement of Mr. McCormick follows:]

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                                   __________

        Mr. Coble. Thank you again for your attendance here. And
    since this is the gentleman from Tennessee's bill, I am going
    to give him the courtesy of kicking--kicking it off. Keep in
    mind, folks, we try to impose the 5-minute rule against us as
    well. So, if you can keep your responses terse, that would be
    appreciated.
        The gentleman from Tennessee.
        Mr. Cohen. Thank you, sir. I appreciate your courtesy.
        Ms. Greenberg, Mr. Warren, in his testimony, concentrated
    on the definition of the word ``discriminatory,'' in terms of
    taxes, but never even got around to regressivity, and that this
    is a most serious regressive tax.
        Would you talk to us a little bit about how regressivity
    affects Virginians?
        Ms. Greenberg. Well, so those who rent vehicles often do
    so, because, we have already pointed out, they are often in-
    state residents. And they do so, because they can't afford to
    own a--a vehicle. And they may be taking a child to a sports
    event, or they may visit an elderly parent in a nursing home.
        Mr. Cohen. To the doctor. They could be----
        Ms. Greenberg [continuing]. Relative to the hospital.
        Mr. Cohen. They could save their life.
        Ms. Greenberg. Right. And so there are multiple uses and
    consumers who can't afford a car have to rent a car for special
    occasions or emergencies. And as a result, those people end up
    paying these really onerous taxes. No, it is not a progressive
    tax, it is a very regressive tax, because it is not adjusted to
    the person's income.
        One of the studies we quoted said that various groups,
    including African-Americans, rent a disproportionate number of
    cars, and they pay these high taxes, and the benefits doesn't
    necessarily come back to them.
        So, yes, we do believe this is a very regressive tax. But
    the taxes on rental cars, and there are--as--as my testimony
    indicated, there are many, are very regressive, and we would
    much prefer to see States and localities--we don't oppose
    their--their raising--their imposing taxes. We would much
    prefer to see those being put in a--a progressive taxation
    system, rather than this very regressive tax.
        Ms. Cohen. Thank you, Ms. Greenberg. Mr. McCormick, further
    in Mr. Warren's testimony, he talked about the fact that
    Virginia exempts an inventory of rental vehicle companies from
    a fairly significant property tax, as well as the rental of
    vehicles from the State's sales-and-use tax. He says the Bill
    makes no allowance for this tradeoff, which is rather favorable
    to the industry.
        Does he make the--miss the point that what they are giving
    to the industry is the industry. What we are talking about here
    is the consumer, and that the individual traveler pays for
    this, and would get no benefit necessarily, even though there
    could be a pass-through, determined on the company, on these
    quote, unquote, tradeoffs.
        Mr. McCormick. Yes. Clearly, our focus is that the business
    traveler and the--and the consumer, and in this case, I mean
    you are right, the taxes that--that they are paying are
    artificially, you know, depressing business travel, having an
    impact on the consumer. People are paying exorbitant, you know,
    fees and taxes over and above what they are expecting. And it
    really is one, to me, has nothing to do with the other. It is
    not the issue.
        Mr. Cohen. Thank you. Mr. Frederick, you--you are well
    aware of the fact, and I think--I think it was in your
    testimony as well, that--that most of these taxes are, in fact,
    paid by local folk, and they are regressive. But a lot of them
    are paid with the--and even though, as Mr. Warren said, some--
    they take it to the general fund in Virginia, et cetera, et
    cetera, but that most of them are for stadia.
        All the owners of these teams, and--and the people that
    build these stadiums, and they can be NBA, which they have in
    Memphis, or NFL, or whatever, they are all in favor of that,
    are they not, to let somebody else, don't tax me, don't tax
    thee, tax that guy behind that tree?
        Mr. Frederick. Absolutely. The--the owners of any team
    are--are more than willing to let the public pay for the costs
    of building the stadium, while at the same time, reaping the
    profits from that stadium.
        And as I said, you know, most the experts that have looked
    at this have said that all that these stadiums do is to move
    money around, and to increase the value of the franchise, but
    not to really degenerate any new economic revenue.
        Mr. Cohen. And I see him at the yellow, but we hadn't
    gotten to the red, and I don't know--but he also says in his
    testimony the tax burden on some consumers might relieve the
    burden on others would surely be exacerbated, as States find
    ways to recoup lost revenue to fund these type programs.
        Would it be so awful to exacerbate the tax burden on the
    multi-, multi-, multi-millionaires and billionaires who own
    these teams, none of whom seem to be missing any opportunity to
    go to Tiffany's, with maybe--and--and whatever they want, or
    whatever they want to do, and buy another team, or get a
    quarterback, or if they don't like Peyton, they might even
    trade and try to get Eli. [Laughter.]
        Mr. Frederick. Absolutely, Rank--Representative Cohen. And
    I--I would say that one of the--one of the drawbacks to these
    taxes is that, because they are regressive, the very same
    people who can't afford tickets to go into the stadium are the
    same ones that pay more for--for the rental car taxes.
        Mr. Cohen. Thank you, members of the panel. And thank you,
    Mr. Coble.
        Mr. Coble. Thank you, Mr. Cohen. Appreciate that. We have
    been joined by the distinguished gentleman from Georgia, Mr.
    Johnson. Good to have you with us.
        Ms. Greenberg, do you believe it is unfair that automobile
    rental taxes go oftentimes to support or construct stadiums and
    other non--non-related tax matters or transit matters?
        Ms. Greenberg. Yes, we do. And I certainly said that in my
    testimony. One of the things we point out is that we don't
    object to States and localities raising taxes for critical
    services like building hospitals, or roads, or schools. But to
    ask the average consumer who rents a car to pay the cost of a
    stadium which he or she may never be able to use, people--even
    tourists coming in from out of state, may never have the
    opportunity to use those stadiums, I think is unfair, and it is
    regressive, and that is why we support this legislation.
        Mr. Coble. Thank you. Mr. Warren, if Mr. Graves, and Mr.
    Cohen's bill is enacted, would H.R. 2469 prohibit all taxes on
    rental cars or only new taxes?
        Mr. Warren. Well, Chairman Coble, two things. It--it--it is
    a prospective bill. So, in theory, a--a jurisdiction such as
    Arlington would be able to keep its tax, but we could never
    change it. Moreover, the surrounding Northern Virginia
    communities, which may not have enacted one, would not be able
    to enact one.
        Insofar as what could be enacted, and not be quote,
    unquote, discriminatory, I don't now the answer to that. We
    have a 1 percent in Virginia. Some locations have a 1 percent
    daily rental tax on things other than automobiles. Would it
    be--it would be allowed 1 percent. But then we also have the 5
    percent sales tax. Would that be a comparable tax?
        And one of the problems with this bill is, it is very
    difficult to know how a court is going to compare A with B to
    come up with is it or is it not discriminatory. And the problem
    is, without an administrative agency to--to rule on this, you
    may--and you and I practice in the same area, we are
    attorneys--you may have a different ruling in the fourth
    circuit, in the third circuit. It is going to be a mess for
    everybody.
        Mr. Coble. Thank you, Mr. Warren. Mr. McCormick, States
    have a Tenth Amendment right to set their own tax policies,
    presumably. And if that is the case, some will say, well, why
    should the Congress interfere with State tax policy in purely
    intrastate issues. What do you say to that?
        Mr. McCormick. Well, I really go back to my earlier
    statements, which is, I think when we look at the taxes that
    are being levied, and they are, you know, discriminatory, and--
    and just, you know, in some cases, outright ridiculous, in--in
    terms of their proportion to the cost of the rental, I think we
    need to take action. We can't leave it to the local
    jurisdictions to make those decisions.
        There are plenty of opportunities to collect tax revenues.
    There are plenty of opportunities to collect appropriate tax
    revenues on car rental. But we are looking to just look at--at
    ways to protect the consumer and the business traveler from
    exorbitant ones.
        Mr. Coble. Dr. Frederick, do you want to add anything to
    that?
        Mr. Frederick. I agree with him. Yes.
        Mr. Coble. Okay.
        Mr. Frederick. Thank you.
        Mr. Coble. I want you all to take judicial notice. I am
    beating the red light before it illuminates. [Laughter.]
        I am pleased to recognize the distinguished gentleman from
    Georgia for 5 minutes.
        Mr. Johnson. Yes. I kind of like the title of this, the--we
    are--we are looking to protect consumers from discriminatory
    State taxes on motor vehicle rentals. And while we--when we
    invoke the specter of discrimination, we talk about people who
    live in the cities. And I think, for the most part, intercity
    residents are assumed to be African-Americans and other
    minorities. So, we get a picture of protection of minorities
    against taxes that discriminate against them.
        This is just my perception of what we are dealing with.
    And--and so, those things being assumed as true, it--it kind of
    makes you want to protect those persons, particularly African-
    Americans, since I am African-American, you know, from being
    discriminated against.
        And I guess what I want to know is, and, of course, the Act
    itself does not describe a discriminatory tax in that way, but
    that is my perception, given what we have heard today, and the
    title of the Act, and the purpose of the Act.
        Is there any--can anybody cite any evidence as to
    discrimination, in the classic sense of the word, that is
    directed at a particular class of individuals that this act is
    protecting?
        Who is it really protecting, in other words? Is it
    protecting the car rental companies from having to charge a
    tax, thus pricing, perhaps, their product out of the means of--
    of people, or is it protecting people who have to pay the tax?
    What are we really trying to do here, so that we can make sure
    we understand the exact intent?
        Mr. Warren. Representative, if I could, this tax brings in
    $5.4 million to Arlington County. We do not have any rich
    sports moguls. Well, we may have them there, but I don't know
    how we are going to tax them, because their stadiums are not
    there. We tried for National Stadium. We didn't get it.
        If we were to lose this money, we would have just two
    choices. Raise the personal property tax on--on vehicles of
    ordinary citizens, or raise their real estate property taxes.
        Now, we have a historically Black community in Arlington,
    and people are losing their houses, because they cannot afford
    the taxes. So, when you get rid of this tax, you basically just
    shift the burden from some taxpayers. And I can guarantee you,
    the people in Crystal City, mostly renting these cars, are over
    here to lobby Congress to spend money on Federal contracts.
    They are not the poor people of Arlington. But a lot of middle
    class and poor people in Arlington do pay the real estate
    property tax, and they would be negatively impacted by the loss
    of this revenue.
        Mr. Johnson. Well, what you are pretty much saying is that
    your car rental taxes don't go to pay for stadiums for
    millionaires and billionaires. They go for other purposes like
    roads, and hospitals, and schools, and--and whatnot. Is that
    what you are arguing?
        Mr. Warren. Yes, sir. It goes into our general fund. It--it
    pays for--for roads. It pays for the firefighters. If you
    remember, in 9/11, it was the Arlington County firefighters who
    responded to the Pentagon.
        Mr. Johnson. Well, tell me this, in your jurisdiction, is
    it just minorities, intercity residents who are having to pay
    the tax--the car rental tax, or is it some other group of--or
    some other demographic?
        Mr. Warren. Frankly, Representative Johnson, it really does
    discriminate pretty heavily against lobbyists. They pay a lot
    of the taxes. But other than that, I certainly don't think in
    Arlington County, which is a very diverse community, that
    minorities pay a--a disproportionate fair--part of this tax. I
    do believe that the general fund contribution benefits
    minorities and others in Arlington County.
        Mr. Johnson. Well, Mr. Warren, I have been accused--because
    I can deliver a--a humorous line without smiling, I have been
    accused of being stupid. And I am glad to know that I have a
    fellow stupendous individual sitting right in front of me that
    I have been talking to during this hearing, and has been
    responding to my questions. So, thank you very much, sir, for
    your stupendous qualities.
        Mr. Warren. Thank you.
        Mr. Coble. And Mr. Johnson, I hope it won't erase that
    smile, but your red light has illuminated. [Laughter.]
        Mr. Johnson. Well, that does cause me to smile.
        Mr. Coble. Very good. Folks, again, thank you all for being
    here. I appreciate very much your time and your testimony
    today.
        Without objection, all Members will have 5 legislative days
    to submit to the Chair additional written questions for the
    witnesses, which we will forward, and ask the witnesses to
    respond as promptly as they can, so that their answers may be
    made a part of the record.
        Without objection, all Members will have 5 legislative days
    to submit any additional materials for inclusion in the record.
        With that, again, I thank the witnesses.
        And this hearing stands adjourned.
        [Whereupon, at 2:22 p.m., the Subcommittee was adjourned.]
                                A P P E N D I X

                                  ----------

                   Material Submitted for the Hearing Record

      Letter from Josh Nassar, Legislative Director, International Union,
       United Automobile, Aerospace & Agricultural Implement Workers of
                                 America (UAW)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       Letter from Thomas M. James, President and CEO, Truck Renting and
                          Leasing Association (TRALA)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Prepared Statement of the Federation of Tax Administrators, and
                    Government Finance Officers Association

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Letter from Bob Barton, President,
                   the American Car Rental Association (ACRA)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                       Prepared Statement of Matt Blunt,
           President of the American Automotive Policy Council (AAPC)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       Prepared Statement of the Interactive Travel Services Association
                (ITSA), and the Business Travel Coalition (BTC)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Letter from Charles M. Loveless, Director of Legislation, the American
          Federation of State, County and Municipal Employees (AFSCME)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]