Car rental tax bid meeting resistance

Some say measure should be used only as a last resort

February 23, 2007|By Phillip McGowan | Phillip McGowan,sun reporter

County Executive John R. Leopold's push to create a rental car tax is meeting with resistance from lawmakers, who say they are not convinced that it is needed to balance the budget.

While all seven council members signed Leopold's letter Wednesday to the Anne Arundel legislative delegation seeking the state bill in a show of solidarity, most have said since then that the tax should be employed only as a last resort.

"As we go into this tough budget year for fiscal year '08, we need as many tools as we can in the toolbox," said County Council Chairman Ronald C. Dillon Jr.

Calling the budget outlook for fiscal year 2008 "dire," Dillon, a Republican, said the county needs at least the authority to consider a rental-car tax, which Leopold said could generate several million dollars.

Another Republican on the council, Edward R. Reilly said the school board's budget should be the first place to look to cut costs: "I haven't been convinced that we are in a dire situation."

While few outside the Arundel Center know details about the coming fiscal 2008 county budget - which Leopold will announce in May - the possibilities of an income tax hike, layoffs and big cuts to education are looming large.

The county is bracing for potentially $200 million in new expenses annually to the county's operating budget to cover the costs of 10 union contracts; rising retiree health-care costs; and a soaring education budget to raise performance and fix schools. Leopold said he is taking the "prudent approach" in seeking approval for a rental-car tax.

The state bill would tax rentals of fewer than 180 days and would exempt taxicabs and limousines and cars rented while owners are having their vehicles serviced.

Other particulars of the tax, such as if it would be levied daily, per rental or as a percentage of the cost of a vehicle, were not included in the proposed bill. County officials said the council would hammer out such details if the General Assembly approves it.

Del. Mary Ann Love, a Glen Burnie Democrat, said the county House delegation would likely begin debate on the bill next Friday.

The county executive said the rental-car tax would target business travelers and tourists and have a "very minor peripheral impact" on county residents.

Leopold said he would impose the tax only if all efforts to find savings were exhausted and necessary services could not be maintained without added revenue. He has already imposed a hiring freeze of 200 positions and cut about $1.5 million through internal restructuring.

"I am loath to talk about any tax increase of any kind," Leopold said. "It's my responsibility as the fiscal leader of this county to do all that I can to prepare the county for the looming financial challenges on the horizon. I think it would be irresponsible not to."

Asked if he is considering other taxes, Leopold said: "I will cross that bridge when I get to it."

Leopold would capitalize on the presence of Baltimore-Washington International Thurgood Marshall Airport, where an estimated 900,000 cars are rented a year. The state currently charges a daily transaction fee of $3.25 for use of a rental car, generating $11 million a year to finance the cost of the airport's rental car facility, said Jonathan Dean, an airport spokesman.

Local and state lawmakers said they understand that approach of taxing non-residents, but many are not ready to sign on. In the anti-tax climate of Anne Arundel, some do not want to be associated with any proposed tax increase because businesses and residents would feel a pinch. Others worry about the impact on tourism.

Rather than create a tax, some propose cutting first, pointing to the $920 million county school budget, a 17 percent increase over the current year. Leopold said this week that he would cut the education budget.

Council member G. James "Jamie" Benoit, a Democrat, said he would support the rental-car tax if revenues were directed to the school budget.

"If we are going to increase taxes, I am going to support that the school budget gets funded," Benoit said.

Del. Pamela G. Beidle, a Linthicum Democrat, said if the county needs extra revenue, Leopold should push to raise the local income tax, known as the "piggyback" tax, a move that could net Anne Arundel an estimated $80 million annually.

"I would rather see the county executive raise the tax he is responsible for raising," she said.

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