Last week, NCPA released a report on travel taxes. Hotel occupancy taxes comprise the largest share of taxes on an average trip, while plane ticket taxes and rental car taxes rank second and third. Travel taxes are politically easy to levy, because it is assumed that those who pay them are “out of towners” and have no voting power in the area that imposes the taxes.
According to Curb Auto Rental Taxes (CART), which is a coalition of firms, consumer groups and labor organizations, several stadiums have been built (see CART’s map here) with substantial revenue from excise taxes on car rentals (these are taxes that are in addition to local and state sales taxes). This is just bad policy on top of bad policy for a couple of reasons:
- First, although many stadiums have been built using public money – usually by way of increases in the local sales tax – citizens generally oppose using such moneys to build stadiums. This despite promises by local officials of more local economic activity and jobs that come from patrons purchasing tickets, concessions, etc.
- While imposing an excise tax on rental cars is presumed to be less painful on locals, CART points out that one out of two rental car customers are local. This makes sense; unlike hotel occupancy taxes, which overwhelmingly tax those who are travelers, the rental car market is used by locals for a variety of reasons.
Finally, I should point out that even for those who support public spending on stadiums, via excise or sales tax revenue, the promised economic goods from a shiny, new stadium simply do not pan out. Andrew Zimbalist, a leading sports economist at Smith College and John Siegfried of Vanderbilt University have researched at length on the economic effects sports stadiums. Through much empirical analysis over several decades, they have concluded that sports stadiums do not increase employment or economic activity in an area, and that most monetary benefits from the stadium accrue to the owners and the teams. In other words, the taxpayer is screwed.
Simply put, rental car users who are forced to fund stadiums get a double dose of bad public policy.