The Denver City Council’s Economic Development Committee should reject a proposed increase in the tax on rental cars when it considers the issue July 20. The increase – a 1 percent bump to a total of 14.35 percent – would hit the wrong market and could help drive jobs and business out of the city to suburban competitors.
We have no objection to a companion plan to increase the city’s lodger’s tax by 1 percent, to 14.85 percent. The hotel industry has endorsed that increase if it is earmarked to promote conventions and tourism in Denver. Most purchases in Denver are taxed at just 7.6 percent, so when one industry is singled out for surcharges, it is crucial to have the consent of the targeted businesses. Denver hotels have accepted this plan, but rental car companies are firmly opposed to an increased tax on their services.
Rental car companies have sound reasons for their opposition. Not very many Denver residents stay in Denver hotels. But more than half the rental car business is from local customers, who need a van for moving, have a car in the shop, or rent for other purposes. Enterprise Rent-A-Car alone reported more than 50,000 local customers in the Denver area last year. That translates into thousands of citizens who would vote against increasing an already hefty tax.
Advantage Rent-A-Car and the company that operates Alamo and National have joined Enterprise in opposing the tax increase – and we respect their judgment.
Conventioners pretty much have to stay in hotels near the Colorado Convention Center. But the local residents, tourists and business travelers who rent cars don’t have to get them in Denver. If Denver’s tax is boosted to 14.35 percent, a rental company in unincorporated Adams County, where the tax is just 4.6 percent, could undersell a nearby competitor at Denver International Airport by $19.50 on a $200 rental, just on taxes. A rental company in Lakewood would likewise enjoy a $15.50 advantage over a Denver competitor just east of Sheridan Boulevard.
We agree with Councilwoman Jeanne Faatz, who wants to limit the tax increase to hotels alone. The $2.8 million the hotel tax increase would raise is still a sizable increase in the Denver Convention and Visitor’s Bureau budget, now $8 million. The rental car tax hike is also expected to generate about $2.8 million, but if the city really needs that extra money for tourism promotion, we’d suggest taking it out of the $15 million a year surplus that the current tax has generated in each of the last three years.
Obviously, the city wants to use that surplus for non-tourism-related items. But killing the goose that lays the golden egg is never sound fiscal policy.
