Published December 17, 2012
Steep taxes on rental cars have become the norm for travelers, or anyone in need of a car.
In fact, sometimes up to 30% of the cost of a car rental is taxes. In 2008, U.S. households spent more than $47 million on rental car taxes, according to the Brattle Group, an economic and finance-consulting firm.
“There’s eight times the number of taxes and revenue since 1990 on rental car consumers,” said Sally Greenberg, executive director of the National Consumers League in Washington, DC.
But many car rental excise taxes are not necessarily going towards roads, bridges and stoplights – the kinds of things that keep rented cars in good shape and their driver’s safe.
In El Paso, Texas, there is a 5% tax to support the corporate-sponsored Sun Bowl.
Jimmy Rogers Jr., who has been a board member on the Sun Bowl Association for more than 50 years, advocated heavily for this tax to primarily help fund costly payouts to get teams to play in the Sun Bowl.
“Had that car rental tax not been approved, I kind of doubt it we’d be in business at all,” said Rogers.
The tax was voter-approved in 1997 on all cars rented in El Paso.
This year, the Sun Bowl Association paid $2 million to both Georgia Tech and USC who will be playing in the Hyundai Sun Bowl this New Years Eve.
Rogers said the better the team, the more expensive the payout – and the tax assures that stronger teams will be playing the annual bowl in El Paso.
“(Otherwise) we would see much lower payouts and we would not see teams at the level that those two schools,” said Rogers.
But Greenberg said it’s not fair for people renting cars to foot the bill for an event they may not be attending.
“They don't reap the benefit of many of these events. In fact, many consumers can't afford to go to these events, but when they rent cars they are being expected to pay these astronomical prices in the form of taxes.”
Yet Rogers said the Sun Bowl brings on average $15 million to 17 million a year to El Paso, and over 8,000 visitors.
“It is a source of income to invest in something in the community that improves the quality of life in the community,” said Rogers.
Greenberg said if it’s going to be an economic boost, then other industries should be contributing as well, as rental car companies feel targeted by these high taxes.
“It should be done across the board, not people who are car renters who need a car for whatever reason.”
More than 40 states have similar car rental taxes, often funding venues and athletic complexes. In Las Vegas, a 2% rental car tax went towards building The Smith Performing Arts Center. However, the tax only applied to tourists.
A similar tax was in place to fund the American Airlines Center in Dallas, which is a city-owned building, where the Mavericks play.
Some travelers at the El Paso International Airport told FOXBusiness.com they were in shock to hear of these excise taxes.
“I think it’s ridiculous for something that’s a commercial enterprise where you have corporate sponsorship, where you have people who have to pay to attend the event,” said Michelle Joseph, visiting from Big Rapids, Mich. “I have to pay an extra 5% on my car rental and I’m not going to be here for it and I’m not getting anything for this,” added Joseph.
Vincent Jones of Alamogordo, N.M., thinks if excise taxes are in place they should directly benefit the auto industry.
“Rental cars are used on the road. Why not use the tax for what their purpose is for?”
Yet some people who live in El Paso feel the tax is just fine if it keeps the Sun Bowl here, now in its 79th year.
“I think it’s just kind of the norm, how progressive cities across the nation operate. I think it’s time for El Paso to embrace what it takes to really show our city off,” said Ashley Bowling.
Priscilla Fernandez said the tax should stay since if it will sustain the Sun Bowl.
“It’s a tourist attraction. It does provide entertainment,” she said.