Tax activists and experts are calling on lawmakers to bring an end to taxes that specifically target tourists.
While H.R. 1528, a bill pertaining to the discriminatory taxes on automobile rentals (EDSTAR), languishes in committee, a Federalist Society white paper published in March addresses the constitutionality of the government to act on the issue.
"The genius of the United States Constitution lies in its separation of power: first, between the three branches of Federal Government, and second, between the States and the Federal Government," Erin M. Hawley said in her Federalist Society paper.
Speaking with guests at the U.S. Capitol on Thursday, Hawley reiterated her defense of the Commerce Clause and its interpretation by the current government.
"The core purposes of the Commerce Clause are important. Unity is at stake … The Commerce Clause is at its height when talking about instrumentality."
Congress faces new challenges in the area of discriminatory taxes, and has a history of legislating on the issue with the Airport Development Acceleration Act of 1973 and the Interstate Commerce Commission Termination Act of 1995.
The exorbitant taxes levied by what Hawley referred to as "economic warfare" are at the heart of what precipitated war with the British at the founding of the United States.
"The go-to move for many state and local lawmakers seeking to raise revenue is to hike taxes on people who can’t vote them out of office, namely travelers and tourists. Due to the increasing popularity of this approach, taxes on things like hotels and rental cars are exorbitant. Today, taxes account for more than 38 percent of the average cost of renting a car," Patrick Gleason said in an article advocating for Government intervention on Forbes.
Research indicates that hikes to rental car taxes, as well as others, affected local economies in the long-run. A study by the National Business Travel Association in 2006 found that "car renters [had] been hit with more than $3 billion worth of these taxes," and that "stacking extra taxes on … customers is unjustified by almost any criteria."
In a free market economy, however, competition and capitalism can allow for consumers to seek the lowest rate when participating in interstate commerce, but Will Upton, state affairs manager at Americans for Tax Reform (AFR) argued that "sometimes you don’t have a choice."
"Inevitably you will run into these taxes," Upton said during the panel discussion.
"The founders envisioned unitary national markets … We get into problems when we see states and localities disrupting the nationality of that market. Yes you can choose to [do business] with someone else, but the idea is that we are all in this together," Hawley said.
Congress, and the higher U.S. courts, have debated discriminatory taxes and how they differ from Government’s ability to levy additional "fees", similar to the national discussion on mandatory participation in Obamacare individual mandate.
Upton told the Washington Free Beacon that the difference between the two is clear.
"A fee is an exchange for a service. Putting a fee on a rental, if that money is going to the government, it is not a fee—it’s a tax," Upton said. "If they want to call it a fee, they can try all they want, but in the end … any state government, department of revenue, or CBO would score it as a tax."
H.R. 1528, proposed in March 2015, and similar legislation pertaining to discriminatory taxing, will either stall in committee, or will be forcibly sent to the House or Senate for consideration.