Three years ago, Car2Go, a car-sharing business entered the Minneapolis market. Suddenly 400 Car2Go vehicles (you’ve seen them – the tiny blue and white “smart cars”) appeared all over the Twin Cities as approximately 29,000 Minnesotans downloaded an “app” on their smart phones and joined this car-sharing network. In an abrupt move last fall, the company announced they were leaving Minnesota “due to extremely high state car rental taxes.”
According to the Star Tribune, the “motor vehicle rental tax is 9.2 percent, plus there’s an additional 5 percent fee to reimburse lessors for the cost of registering vehicles.” In addition, “there’s the general state sales tax (currently 6.875 percent), plus other local taxes that apply to leases or rentals of motor vehicles.” All of that adds up to some whopping high taxes on rental cars that forced Car2Go, owned by Daimler North America Corporation, to leave the state.
It is important to note that car sharing rental taxes and fees are the same as those paid by conventional car rental companies. Even more important is the fact that taxpayers have paid these taxes and fees for many, many years – they are a convenient and easy tax to raise when state and local politicians start looking for additional revenue to fund even bigger government. Politicians raising these taxes like to delude themselves by believing that car rental taxes are paid by visitors to the state, not Minnesotans. Imagine the surprise of many big-spending legislators when they found out a convenient and popular car sharing service was forcing Minnesotans to pay the same taxes as everyone else who rented a car to drive on our lousy and congested roads.
Apparently these tiny “smart car” car-sharing services have some friends in high places. Recently, a measure was introduced in both bodies of the state legislature to exempt car-sharing firms “like Car2Go” “from paying motor vehicle rental taxes and fees in Minnesota.”
The legislation, introduced by Rep. Ilhan Omar in the House and Senator Scott Dibble, had a hearing in the senate Taxes Committee this week where the measure to cut car-sharing rental taxes was approved by a voice vote. The bill’s sponsor stated that by lowering taxes on car sharing services, Car2Go or other similar services, might reenter the Twin Cities market.
The shocking news is that there are some high Minnesota taxes that even the most liberal DFLers want to reduce. It’s too bad that they don’t see the hypocrisy of government continuing to pick winners and losers from similar businesses and cutting taxes on their preferred businesses (Car2Go) while everyone else continues to suffer the burdens of and pay some of the highest taxes in the nation.
Make no mistake about this pending legislation: these aren’t tax cuts – they are crony capitalism at its worst where state legislators are picking winners and cutting their taxes while everyone else continues to pay some of the highest taxes in the country.