Love mass transit? You might pay for it next time you rent a car in Florida

Just when you thought they couldn’t possibly add any more fees to rentals, here comes another: A freshman state senator in Florida is trying to slap a $2 tax on cars to support Tri-Rail, South Florida’s commuter train.

No one believes Tri-Rail is an unworthy cause. But should tourists pay for a rail system they’re unlikely to use?

The Tax Foundation, non-partisan research organization that has monitored tax policy, thinks not.

A rental car tax is a particularly inappropriate revenue source for commuter rail. Because Tri-Rail is designed to move commuters from suburban areas to business districts, with peak service at rush hour, it not very useful to the leisure travelers who dominate South Florida’s car rental market. It is clear that car renters are being targeted not because they are beneficiaries of Tri-Rail, but because they are a tax source that lacks representation in the Florida legislature.

Here’s the bill in its entirety. The relevant language allows the state to authorize the county

… to impose a county surcharge upon the lease or rental of a motor vehicle licensed for hire; requiring that the county surcharge may be used solely to fund the transportation needs of the county as determined by the county commission; requiring the county commission to place the county surcharge on the ballot of the next general election for a vote by the electors; providing an effective date.

The car rental industry is up in arms. The American Car Rental Association, a trade group, released the following statement:

Every rental car customer — regardless of whether they are a Floridian or a tourist — currently pays $2 a day in rental car tax.

Each rental car bill is increased by an average of 13.23% due to taxes (rental car tax, airport access tax, consolidated facility fees, security fees, etc.). If rented at an airport, the average amount added to every bill grows to 24.13%.

What other consumer service is taxed at such a high rate?

Government user fee increases. It is true that many fees such as motor vehicle registration, title fees, and even speeding tickets are being increased to assist with the budget deficit. But there is a major difference between those fees and the rental car tax.

Those fees pay for a service provided by government, such as the receipt of a vehicle registration or title. Increased fees for speeding or running red lights are levied to protect public safety and deter future violations.

The rental car tax is completely unrelated to a service provided for public benefit or any other state-related purpose. It is simply a tax on a small group of consumers.

This tax increase is bad public policy because it:

Forces one industry’s consumers to pay for a service from which they do not benefit. An increased car rental tax would place an excessive burden on a limited number of customers from a single industry. Why is this small group of consumers being asked to fund the needs created by everyone?

Penalizes Floridians who rent cars. This tax will not be borne only by tourists! Florida residents and businesses rent cars for a variety of reasons, such as when their car is being repaired, for weekend leisure trips or for business trips. Last year, 74% of just one rental car company’s customers were Florida residents.

Negatively impact Florida’s economy. Tourism is a key driver Florida’s economy. Yet studies show that increasing rental car taxes lowers the number of cars rented. According to Amy Baker, Director of the Florida Legislature’s Office of Economic and Demographic Research, “the national recession is largely responsible for the state’s tourism downturn…the two places you’d see it the most are in sales tax collected and in rental car surcharges”.

Visit Florida is partially funded by a portion of the $2 a day rental car tax. However, it was recently reported that these collections were down 14% in the final quarter of 2008. The recession has greatly affected tourist industries such as hotels, theme parks, convention centers, restaurants…and rental car companies. Increasing this tax will further diminish the state’s ability to attract tourists and businesses to our state.

Rental car companies are a portion of this industry and they have had major employee layoffs that began late last year. Anything that lowers the number of cars rented will only push more people into our unemployment lines.

I don’t think anyone is saying Tri-Rail is an unworthy cause. But should tourists have to pay for a service they’re unlikely to use?

There are two solutions: First, you could avoid renting a car in South Florida. Or you can e-mail Sen. Smith and ask him to reconsider his position on this proposed new tax.

  • http://pragueapartmentsonline.com Martin Smith

    I live in South Florida and this is just one more attempt to use the tax laws to support democratic liberal white elephants. This tri-rail is so bad that practically one uses it. It doesn’t serve the areas that need to be served but basically goes from West Palm Beach to Miami roughly paralell to I-95. It is stupid, expensive, and supported only by the nut case liberals and the bureaucratic slaves that live on their ideological (and my tax supported) plantation.

  • Amy

    I am all for nearly any proposal to get more public mass transit. I lived in NYC for 12 years without a car and in NJ for another 10 years using the trains to commute. Trouble is, only the Boston – New York – Washington corridor has extensive interconnected mass transit for residents or visitors. The rest of the country has almost none and it will cost a fortune to develop and people do not know what they are missing so there is little effort to get it going. Even in cities with transit, like Atlanta or San Diego, it is often underutilized. As a tourist in each city, I have asked residents which stop would be closest to their store, or restaurant and been told they had no idea, they, or the people they see as their clients, would not use the transit system.

    This tax will probaly not help at all. It is not changing the perception of transit as beneficial and it will not create enough money to fund the transit but it will drive other businesses into the ground.

  • Daniel

    Martin Smith-

    Instead of railing about “nut case liberals”, how about you and the rest of the Floridians (I am an ex-Floridian) man up and admit that perhaps it’s time for an income tax like the rest of the first-world states in this country, and stop increasing the taxes on tourists.

    Maybe then you’d have a few dollars for your atrocious schools, hospitals, roads, etc.

  • Roberto

    Is this really the first time you’ve ever seen politicians get a tax increase passed by taxing something their constituents don’t use?

    “Sure, you can have your X without paying for it. Group Y will pay for it!”

  • Jasper

    It’s simple. Infrastructure benefits everybody. So everybody should pay for it. Even if you don’t use the train, you benefit by less congestion on the road.

    That’s why governments collect income, property, sales taxes. Separate fees, taxes and surcharges are silly, bureaucratic and inefficient, while politically oh-so-tempting.

  • tbird

    as a planner who grew up in south florida and now works in south florida and who has had the pleasure of enjoying other locales that have great mass transit options, i support this tax. tourists driving means more cars on the road in addition to the normal residents driving. it is rather unfortunate that we do not have better mass transit options to offer tourists but driving is a privilige and not a right. additionally tourists driving adds to our already congested roads, so having this tax to increase tri rail service just make take some residents off the road and decrease congestion (because the tourists will never stop driving).

    a few things:

    1. you have to pay for increased mass/public transit options the money has to come from somewhere and seeing that Florida just voted to severely limit the amount of property taxes that the counties and various municipalities are able to collect means that there is less money around for the muniicpalites to pay for this type of service (generally mass/public transit has to be subsidized since it doesn’t make money through fares) so it has to come from somewhere. so why not make tourists pay for using our roads
    2. the residents want better tri rail service. again you have to pay for it somehow.
    3. people do not recognize the true cost of driving. construction and maintenece of roads, gas, and so on. roads are the top thing, and since these tourists ARE using our roads why not tax them for that privilige (driving is not a right)

  • Logan

    As a native of Palm Beach County (one of three counties served by the Tri-Rail system), I agree that it’s a worthy cause. However, Florida is currently in a major budget crisis, and Tri-Rail has operated at a loss since its inception (according to a semi-recent article in The Palm Beach Post), despite the increase in ridership brought on by the recent gas price increase. So far as this new tax goes, the revenue source is based on personalized transportation (cars) to fund mass transportation (commuter trains); this is comparable to taxing tobacco at a high rate to fund healthcare.
    I’m not sure why the rental companies are complaining, seeing as how they neglect to inform out-of-state consumers of local taxes until they arrive at the local rental counter (and the informed consumer should be expecting this anyway). Besides, south Florida could benefit from fewer vehicles on the road (especially during tourist season), and an increase in mass transit. Because Florida lacks the geology to build subways, we must rely on surface transport.
    I further ask: how is this tax different from one to fund a sports stadium? How is it different from the extra .5% sales tax levied in my county for the building of new schools?
    Martin Smith – Sir, as a legally blind person, I must pointedly disagree with your position. Using mass transportation reduces both carbon emissions and cost to the consumer. If done correctly, it could even be more convenient to use than your own private vehicle. The reason Tri-Rail runs parallel to I-95 is because that’s where the rails happen to be, just as bus routes mirror surface streets. Further, it serves the populations it needs to serve by providing both easy public bus connections (for the poor and those lacking cars and/or the ability to drive) and large parking lots (for the middle-class and up who prefer to drive to work), allowing cross-county commuters to reduce traffic on I-95 and get to their place of employment for less money that it takes to buy gas for the same trip.
    Admittedly, I have used Tri-Rail only once, but found it to be a relatively enjoyable experience.

  • carver

    Living in California I know absolitely nothing about Tri-Rail. What I do know is that if this is a worthy cause, the tax should be borne by all Floridians, not just a small group of people who lack representation.

    There is a maxim that the cost of an item should be primarily borne by those who use it. When you make a disconnect between the user and the purchaser, you end up with great inefficiencies and perverted economics.

  • Mike

    I’m with all the others who say that if this benefits all residents via reduced cars on the road then all residents should pay for it. Problem is that we’ve been doing this for years ala the cigarette taxes. We tax the heck out of smokers to pay for stadiums, childrens programs and no smoking programs. people claim it heps people quit, yet they have no idea where the money would come from when people actually do quit. Taxes like these are just another bad idea that forces a small portion of a population to bear the costs of a program that benefits a different group or an entire population.

    IIRC Las Vegas either did or was going to enact a rental car tax something like 2 or 3 years ago. It even went to far as to target tourists specifically because it allowed for an exemption from the tax if the renter showed a valid NV id. The tax was for a VERY large amount too and would have raised many millions a year.

  • Kevin M

    Carver raises a good point above. One of the basic tenets of good government, in my opinion, is a fair assessment of the costs of a government service.

    When a particular service benefits the population at large, the population at large should pay for it. Whether that’s by a sales tax, an income tax, or a property tax is a decision each jurisdiction must decide for itself. Sales taxes fall heavier on lower income residents and on visitors. Income taxes fall heavier on higher-income residents. Property taxes in theory fall on all, but due to convoluted property exemptions for homesteads and special exemptions for investment in industry, these tend to fall harder on small businesses (which don’t qualify for the business incentives) and renters (who pay the property tax assessed on their residences through rent, with no homestead exemption to reduce the impact). Everyone uses roads and streets in some fashion, whether it’s to drive on, bike on, ride a bus on, or whatever. Everyone benefits from an educated population. And if mass transit reduces congestion on roads, then yes, everyone should pay for it – not just people who rent cars.

    However, when a service benefits only a limited few, then a tax or fee levied on those who benefit should pay for the service. It’s reasonable to assess a fee on rental cars to pay for a rental-car facility at the airport. It’s possibly reasonable to assess a fee on rental cars to help improve the roads at the airport, even though a good many airport customers won’t rent cars but will benefit from the roads. It’s also possible such a fee is unreasonable – it comes down to deciding whether the benefits accrue significantly to the assessed group.

    But if a mass transit project only covers one corridor/route, as seems to be the case here, its benefit will be primarily to the users of the highway in that corridor – the vast majority of whom are likely local residents. This one isn’t even close: only a tiny percentage of car renters are likely to benefit at all, but they’d be bearing 100% of the cost. This is, as has been pointed out, one classic way politicians get funding for a project that can’t garner enough public support through a broader-based tax: sticking it to the group that isn’t represented at the bargaining table.

  • Amy

    tbird said: (because the tourists will never stop driving) …. and since these tourists ARE using our roads why not tax them for that privilige (driving is not a right)

    Tourists are driving because there is no other option. Driving is not a right, but it is a forced requirement in South Florida. I happily go to many places – NYC, Boston and most of Europe – with good mass transit and love to be without my car. My commuting to NYC was filled with a daily newspaper, reading many books and a hand knit sweater each month because I rode the train. I know from my brother in law that the Sarasota area is filled with way too many snow birds and their cars as well as other tourists. But who is paying all these taxes and costs to supplement the residents’ tax payments, if not the tourists? Be careful what you wish for, I do no tlike the heat and certainly have stayed away, but many others may as well.

  • P. Kipnis

    So what’s new??? We business travelers have been paying for ball parks, civic projects, and g-d know what else simply because we don’t vote in that jurisdiction. Go rent a car in Seattle, Portland, San Francisco, the cost for taxes, fees, recoveries and every other damn thing that can be added since we’re there and need the car, hotel, or services. Whine, cry and stomp your feet, it won’t make a difference we don’t vote there and the politicians know it.

  • Anonymous

    Correct me if I’m wrong but the Tri-Rail doesn’t even serve MIA or FLL, so if the intent behind the tax is to encourage tourists to use this service, it kind of misses the mark since it’s not easily accessible to tourists.

    I’m all for encouraging people to use public transportation, and in some cities it is definitely the absolute BEST alternative all the way around, so I could see a reasonable argument that a tax on rental cars would encourage people to use public transportation, but not in this case.

  • Jasper

    @ tbird: Euhm, so because Floridians decided they didn’t like property taxes, tourists now have to fill in the budget gap caused by that lack of property taxes?

    That is simply unfair.

  • Ben

    What really burns me is our Legislature is always funding South Florida and completely ignoring Northwest Florida (the Panhandle). We have some of the nation’s most beautiful beaches with its trademark white sand. How about a little money to fund a rail line from Perdido Key to Panama City? It sure would help with the “Mullet Toss” this weekend at Flora-Bama that is expecting 100K+ people. (http://perdidochamber.com/default/index.cfm/mullet-toss/) Thanks for nothing, Florida Legislature!

  • carver

    Tourist use road and should pay. Absolutely. However, residents use the roads and should pay as well. That’s why we have taxes on gasoline, as well as vehicle registration fees. Notwithstanding the impact on the poor, the beauty of the gas tax is that it is relatively proportionate to how much one uses the road.

    I drive a big SUV. My SUV is heavy and uses a lot of gas and stresses the road and environment more than a Pruis. Consequently, I pay alot more gasoline taxes than the Prius owner. I’m happy with that. I made a choice and I am paying for that choice in terms of a proportionately greater amount of gas taxes.

  • Jess

    I am a fan of supporting increased usage of mass transit, however, I feel more of the cost should be born by those actually using the service. Unlike many states, Florida does not have an income tax- perhaps in times of budgetary shortfalls, the residents actually using the services for Tri Rail and other services facing funding shortfalls should be taxed accordingly?

    As a non-resident of Florida, I had the opportunity of using Tri Rail just yesterday to make a transfer from FLL to MIA. (I flew into FLL on a low-cost carrier, as drastic schedule reductions had made travel directly into MIA not an option.) If you are not on a tight schedule, Tri Rail is the way to go. I could not believe that my husband and I were able to make this transfer for $3/person. Taxi fare would have been $70, and a one-day rental car including all taxes and fees was around $65. The connection took around 2-hours because our train was delayed by 40 minutes, but it was simple to use: shuttle bus to the FLL/Dania Beach station, Tri-Rail to MIA station, shuttle bus to MIA terminals.

    Having used public transportation in many of the locations I have traveled to, I did not feel that it would have been unreasonable to pay double the rate. Heck- for me it would still have been a bargain for $10/person.

    I think many people are out-of-touch with the reality of what it costs to operate services like Tri Rail. We are in an era where everybody wants to pay less for more and pretty much expects something for nothing. That reasoning cannot continue if we do not want to see valuable public services fail.

  • Jim_J

    I recently rented a car at Boston’s Logan Airport and had to pay a $10 charge for the renovation and expansion of the Hynes Convention Center. It doesn’t matter whether you rent for one day or one month, the fee is $10. I have never been inside the Hynes Center and probably will never get there. Certainly these rental car add-on fees exist in other places as well and people don’t boycott them because of the fees.

    Actually, people renting a car in South Florida will get some benefit from the $2 fee. There are three major airports in South Florida (W. Palm Beach, Ft. Lauderdale and Miami). Two of the airports are adjacent to I-95 and the third is just a few miles away. Most visitors renting a car will use I-95 sometime during their stay. Tri-Rail runs parallel to I-95 for almost its entire length. Every passenger riding on Tri-Rail is not using not using his or her car to add to the constant congestion that plagues I-95. Therefore, this $2 fee can be seen as a way of making travel along the I-95 corridor just a bit faster.

  • Bob

    Malcontents the whole bunch of you! Why, in my home state of Massachusetts they have been using the gasoline tax to pay for parts of the Mass Transit System.

    In 2005, Republicn Governor Romney gutted the Tool Road Authority’s reserve fund, normally used excusively for the Tool Road Maintenance; to help “balance” the General Fund. More or less the same thing Bill Clinton did when he robber the Social Security Trust Fund to “balance” the Federal Budget.

    The problem, is the voters being dumb enough to keep reelecting these bozos.

    Bob

  • http://www.theorracle.blogspot.com Lyle Orr

    Unspoken here is something that is undoubtedly pushing this issue….

    Disney’s free “Magical Express” is having a MAJOR impact on the car rental industry in Orlando. That decrease in rental has obviously taken its toll in the taxes collected also.

  • Bill

    I’m just back from a trip to Florida. I did have a good time (so did my wife) but it wasn’t cheap.

    They should sell shirts with a picture of a sheep on it, saying “I got fleeced in Florida”.

  • Limousine Orlando

    I visit Florida every year, I do use mass transit but again this is not fair and I am against it.