A new Bluegrass Institute Policy Point takes aim at an effort by Kentucky’s car rental industry to discourage competition by lobbying lawmakers to impose a new 6% tax on peer-to-peer car sharing services.

Car rental companies choose to pass on Kentucky’s 6% motor vehicle usage tax to their customers rather than pay it themselves when registering their vehicles in the commonwealth – an option provided to them by past legislation. Peer-to-peer car sharing entrepreneurs pay the state’s 6% motor vehicle usage tax on the purchase price of their vehicles. If the General Assembly adopted the new 6% tax advocated by the rental car industry, that would amount to double-taxation on an industry poised to provide a new competitive option for consumers. 

“It’s a classic case of rent seeking, which attempts to manipulate public policy to keep newcomers out of the marketplace and deny the benefits of competition to consumers,” said Bluegrass Institute Visiting Policy Fellow Andrew McNeill, who authored the policy analysis which can be read here.

McNeill notes forcing car-sharing entrepreneurs to pass the usage tax on to their customers would violate the criteria for pro-growth tax policy laid out in his earlier report on Kentucky’s economic competitiveness, including adding to Kentuckians’ overall tax burden and favoring narrow special interests over innovative entrepreneurs.

The policy point highlights this controversy as an illustration of how an accumulating series of decisions have made Kentucky uncompetitive against our competitor states. 

“Rejecting the rent-seeking from the rental car industry favors economic freedom,” McNeill writes in his analysis. “Racking up those wins will turn the tide towards greater prosperity in Kentucky over the long run.” 

Report author Andrew McNeill is available for comment at amcneill@freedomkentucky.com or 502.403.7548. 

For more information, please contact Jim Waters at jwaters@freedomkentucky.com, 859.444.5630 ext. 102 (office) or 270.320.4376 (cell). 

The Bluegrass Institute for Public Policy Solutions, Kentucky’s first and only free market think tank, has been offering commonsense ideas to solve the commonwealth’s greatest challenges since 2003. Find these solutions at www.bipps.org.