[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;
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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
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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:]
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__________
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
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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]