Economic Study

Nationally recognized economists William Gale of the Brookings Institution and Kim Reuben of the Urban Institute broke new ground with an in-depth study of the real impact of car rental excise taxes. Their study came to some surprising conclusions:

• Car rental excise taxes are inefficient because they can distort the choices people make regarding what mode of transportation they use.
• Car rental excise taxes are inequitable because it is unclear why users of one particular business or service should bear a disproportionate cost of financing government.
• Despite the growing popularity of car rental excise taxes as a solution for municipal funding needs, all evidence points to the fact that these taxes are arbitrary and unjustified.

Excerpts:

"[T]axes should be designed to promote equity, simplicity, and economic prosperity. Our view is that car rental excise taxes fail all of these tests."
	"Although steep taxes on particular goods can be justified in some particular cases, the conditions for such taxes are not evident in the rental car market."
"The most economically appropriate financing mechanisms for sport stadium renovation or construction would be private investment by team owners and their backers so that customers from one industry are not forced to subsidize the profit margins of another."