Many Cascadian cities, with state authorization, put special sales taxes on rental cars. The rationale, as best I can understand, is that rental car taxes are mostly paid by nonresidents: business travelers with expense accounts and vacationers who don’t vote locally.
The emergence of car-sharing (and someday, I hope, ride-hopping), however, has invalidated this rationale. Flexcar and the Northwest’s other car-sharing enterprises serve local residents, and they have big public benefits: car-sharers drive much less than car owners, meaning less congestion and pollution for everyone. In fact, the awesomely powerful incentive effect of paying for our transportation by the trip, rather than by the vehicle, may be the main lesson the whole Year of Living Car-lessly experiment (now in its eighteenth month).
So the news in my Flexcar newsletter today that tax authorities in Washington are going to apply the rental car tax to car-sharing, starting on October 1 in King County, where I live, came as a shock. It’ll pinch my family (Flexcar-dependent as we are) in the pocketbook, yes; but we can afford it. The shock is the principle of the thing: it is, in effect, a decision to tax people for acting responsibly, in the best interests of their families, their communities, and our natural heritage.
Find this article interesting? Support more research like this with a gift!
In King County, Cascadia’s most populous county, the rental car tax is 9.7 percent. That’s on top of state and local sales taxes, meaning that rental cars have a total tax burden of 18.7 percent.
Buyers of new cars, in contrast, get a sales tax discount, in Washington (and British Columbia too). They can subtract the price of the car they traded in from the price of the car they bought and only pay sales tax on the difference. The effective tax rate on cars, therefore, is much lower than on other taxed goods. If your trade-in is worth half as much as your new purchase, for example, the effective tax rate is halved.
That’s not fair to the car-less and car-lite (who tend to have lower incomes anyway). It’s also stupid public policy: in an era of climate disruption, war in the Middle East, high fuel prices’ economic drain, and relentless gridlock, taxing car-sharing heavily is like taxing penicillin during an epidemic.
If tax authorities can’t reverse this decision themselves, the legislature should. Sign this petition to voice your concern.