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Car Renters Feel Penalized by Sports-Related Taxation

Consumer: Some local governments are hiking taxes on automobile rentals to pay for new stadiums and arenas.


Perhaps you're a true lover of sport, and you've always wanted to dole out dollars for the benefit of unseen franchises in cities other than your own. If so, you may be pleased to closely examine your next rental car bill.

If not, be warned. In an increasing number of cities and states around the country, rental-car customers are being required to pay for sports arenas and stadiums that they're unlikely to ever use.

On Jan. 1, the Washington state legislature boosted its car rental tax in King County (which includes Seattle) from 15.1% to 17.1% to help pay for a new Seattle Mariners stadium. A local group has filed a lawsuit opposing the levy, arguing that the measure amounts to public spending for a private purpose. But in the meantime, the tax stands.

In Atlanta, where the 1996 Summer Olympics will begin July 19, state officials have proposed a 3% excise tax on rental car fees in Atlanta (and perhaps surrounding areas) to raise $50 million toward infrastructure improvements to support the building of a new downtown sports arena. The Olympics will be long gone by the time the arena is done. The officials' prime motivation is to keep the Atlanta Hawks basketball team, owned by Ted Turner's Turner Broadcasting Inc., from leaving downtown.

In Chicago, Illinois state officials have suggested building a domed stadium for Bears football in Chicago, with revenues drawn in part from an existing 6% Cook County rental-car surcharge. The surcharge was instituted two years ago to help build Chicago's McCormack Place Convention Center.

Similar ideas are simmering in Boston and Tampa, and may soon arise in San Francisco and Laurel, Md., where revenue-hungry local officials are eager to build facilities to woo or placate professional sports franchise owners.

"It looks like it's a trend. We're not happy," says John Lee, senior attorney for Budget Rent a Car and legislative specialist for the American Car Rental Assn.

"Shame on them all," scolded the travel agents' trade publication Travel Weekly in a recent editorial against the practice.

Many taxpayers, including Lee, challenge the idea of taxing the public to support facilities that deliver massive revenues to privately held for-profit sports franchises. Others back local taxes to build sports facilities with strong civic value, but draw the line at taxing visitors for a benefit they'll probably never see.

But most objections have so far been ineffectual. The rental car companies--who are the consumer's ally in this case--are ill equipped to fight a dozen simultaneous tax battles in cities across the land. And local convention and visitors bureaus have been reluctant to make enemies among movers and shakers they see daily.

Local leaders defend these taxes by saying the travelers are merely being asked to shoulder their fare share for upkeep and improvements in cities that accept their visits but not their property taxes. The argument can be persuasive in a city such as Tucson, where thousands of out-of-towners arrive every spring to watch baseball players prepare for the season.

There, visitors since 1991 have paid a "Cactus League Tax" of $2.50 per rental-car contract, which goes to pay for several million dollars' worth of upgrades to Hi Corbett Stadium, where the Colorado Rockies spend spring training. (The stadium upgrades are now done, but the tax continues and lately, local officials have raised the idea of using revenues to pay for construction of a new stadium that might house spring training for other major league teams.)

But sports don't play the same role in most other areas levying or contemplating rental-car surcharges. In those cities, rental-car taxes can serve as an effective tool for extracting money from outsiders who don't stand to benefit. When speaking to their constituents, some local politicians even come close to saying it that way.

"Quite frankly, I don't think the [proposed rental-car] tax will have much effect on local people," Georgia state Rep. Jimmy Benefield told the Atlanta Journal and Constitution last month. "Most of the cars that are rented are [by people] from out of state."

In any event, travelers who rent cars face creeping taxation. And that sets teeth to grinding at the Travel Industry Assn. of America (TIAA), where president William S. Norman recently released a nationwide study of rising taxes on tourism. In many cases, Norman asserted, local governments "are using visitors to pay for projects their own electorate will not approve local taxes to fund."

The highest rental-car base-rate taxes in the country last year, according to the TIAA: Chicago, 18%; New York, 13.25%; Las Vegas, 13%; Reno, 13%, and Minneapolis, 12.7%.

Among 50 major U.S. cities, the average rental-car tax rate was 8.24%. Some cities, including Las Vegas, earmark much of their tourism-related tax revenues for tourism-related spending (and set their own definition of what that includes). Others, including New York, drop those tourism-related revenue in with their general funds.

Reynolds travels anonymously at the newspaper's expense, accepting no special discounts or subsidized trips. To reach him, write Travel Insider, Los Angeles Times, Times Mirror Square, Los Angeles 90053.

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