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.
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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.
Word from high up in county government suggests that the leadership there is of like mind. So there’s plenty of hope.I just don’t understand who is behind this decision. Who do we need to talk to?Hey, Flexcar, please explain the ins and outs!Alan
Carless in Seattle
Oh man, this is annoying. It’s like a mosquito bite. Not a big deal, but really aggravating.(and yeah, I picked the name before I found your series here on Sightline. oops).
Matt the Engineer
I doubt they had a choice. With the regulatory and legal burdens implied by the rental tax they were likely in jeopardy by not including Flexcar. This is the same regulatory hand that gives us the GMA and other progressive measures, so tread lightly. I did a quick search hoping to find the legislators involved in the car tax and came up with little. At least 3% of the 18% can be attributed to Safeco Field and the Mariners. Amending it will run into some dark waters from a tourist and hotel industry that will complain earnestly of unequal treatment under the law.
Matt the Engineer
If this tax is really meant to be on out-of-towners, then we should either limit it to car rental that serves the airport (read: SeaTac), or provide a tax extemption when you show your driver’s license.
I know this is all far away from you people (found out about “year of car free” on google) but the City of Pittsburgh is considering a tax on rental cars to help fund public transit (there is also a drink tax for alcoholic drinks at the bars, and bars are up in arms about this too). The rental car companies are upset, saying that many rental cars are used by residents, mostly to replace cars in the shop. I just went car free this year when the Monte Carlo I inherited left me stranded and repairs were 2500 dollars! Since I have a job where I work from home I don’t need a car all the time but there is a Buick in the family so I guess I’m cheating. I does reduce stress, especially when I see what my brother goes through with gas, tires, and car care for his car (he would never dream of taking the bus, or living closer to where he works) Meanwhile, I have three sisters with families, and all of them have three cars per family. I may soon have to buy maybe a small pickup truck because I may get a job in home service. Talk me out of it!
The Seattle Times provides further information today on this story. And the Seattle PI covers it too. Key point: it’s a decision of the state Department of Revenue, based on its reading of state law. The story suggests Flexcar could apply to Revenue for an exemption or seek a change in state law. The latter approach would be more permanent, though it’d take longer.There’s also a county portion of the rental car tax. I wonder if the county could give an exemption to car-share companies, or if state law stipulates the county portion be all or nothing. Such provisions of tax laws are commonplace: the states give localities limited menus of options and insists that they choose from those options without modification.
As a mother and employee of a nonprofit (Sightline, actually), I find Flexcar vital to my life in Seattle. The service allows me to save money on transportation expenses (to the tune of more than $400 a month!) and reduce my carbon footprint. That way, I can enjoy living in a walkable Seattle neighborhood (Columbia City/Seward Park, where the rent is pretty high), instead of relocating to a cheaper suburb (where rent is noticably lower). This is an example of Car-Head. I’m lucky to live in a city that offers this service. The state should provide incentives for car-sharing, perhaps even subsidize it.
Looks like the governor is sympathetic and acting, but can’t force the agency to change it’s reading of the law. See the times article here.Agencies here are often burdened by regulatory obligations that make the sensible thing hard to do. It’s refreshing to find a case where there is some political will to cut through red tape.
Pay as you go should be the form of insurance.These laws are made by people who wouldn’t even consider using transit unless it was a publicity stunt!