A proposal by the city of Indianapolis to raise the local tax on car rentals is drawing the ire of the industry, which argues the increase will affect the local population as much as visitors.
Mayor Greg Ballard and City-County Council President Maggie Lewis on Monday announced an agreement on the city's $1.1 billion budget that calls for raising local car-rental taxes and the city’s admission tax to avoid a potential reduction in services. The proposal still must be approved by the council.
The local tax on car rentals would increase to 6 percent from 4 percent. Combined with 4-percent state rental tax and the 7-percent state sales tax, Marion County car-rental customers would pay a combined 17-percent tax after the increase.
Without the raise, the 15-percent car rental tax rate already accounts for Indianapolis’ being ranked No. 8 on the Global Business Travel Association's list of the worst 10 cities for travel taxes in 2012. The group also considered Indianapolis' 9-percent tax on food and beverages and its 17-percent tax on hotels when making the ranking.
Visit Indy, the city's tourism agency, typically favors proposals that support the Capital Improvement Board of Marion County, spokesman Chris Gahl said. The CIB, which collects the car-rental tax, funds half of the agency’s operating budget.
The CIB oversees Lucas Oil Stadium, Bankers Life Fieldhouse and the Indiana Convention Center. It collected $2 million in car-rental taxes in 2011. Last year’s collection figures are not yet available.
“We are positioned and seen in the visitor’s mind as a high-value destination, even taking into consideration the hotel tax and the projected [higher] car rental tax,” Gahl said.
A study released last month by Visit Indy estimated the economic impact of the tourism industry increased 10 percent in 2011, to $3.95 billion. An estimated 22 million visitors came to the city, most of them for leisure activities.
Gahl said Visit Indy plans to convene its executive committee to study the proposal to raise the car-rental tax.
The car-rental industry opposes a tax increase, arguing that it affects local residents as well as out-of-towners.
“It’s flat out discriminatory and unfair,” said Laura Bryant, a spokeswoman for St. Louis-based Enterprise Holdings Inc., which operates the Enterprise-Rent-A-Car, Alamo Rent A Car and National Car Rental chains.
The three combined have 24 locations in Marion County that would be affected by the tax increase.
Enterprise Holdings and its competitors have argued in recent years, as more cities turn to rental-car taxes to raise revenue, that the taxes may cause more harm than good.
Though local politicians routinely market the levies as so-called travel or hospitality taxes on visitors, more than half of car rentals are actually local, industry figures show.
Indianapolis-based Ace Rent A Car, for instance, rents cars every week to motorists whose vehicles are being serviced or repaired following an accident, said Charlie Mullen, co-owner of the local chain.
“We do a lot of replacement rentals,” he said, "so everybody pays.”
Nationwide, more than 100 car-rental excise taxes have been enacted across 43 states and the District of Columbia in recent years, raising more than $7.5 billion, according to the industry.
The American Car Rental Association last year supported federal legislation that would prohibit future “discriminatory taxes” imposed upon car rental customers by state and local governments. The proposal failed to advance out of a House committee.
Meanwhile, the tax on tickets to attend Indianapolis Colts and Indiana Pacers games would rise to 10 percent.