Illinois lawmakers team up with rental car companies seeking to squeeze out competitors

Illinois lawmakers team up with rental car companies seeking to squeeze out competitors

Lawmakers in Springfield are joining forces with Hertz and Enterprise in efforts to punish companies offering innovative alternatives to conventional car rental options.

An attempt to stifle competition in the car rental industry is making its way to the governor’s desk.

The Illinois Senate passed Senate Bill 2641 in April, a rather harmless bill focused on altering liability laws as they pertain to rental car companies. But since making its way over to the House, several new amendments to the bill have transformed it into a measure that would punish innovative carsharing companies seeking to provide affordable and convenient transportation options. Its biggest backers? Traditional car rental companies: Hertz and Enterprise Holdings.

A House amendment to SB 2641 redefines a rental car transaction as “the transfer of the possession or right to possession of an automobile…including the facilitation of a privately-owned passenger motor vehicle for use by persons other than the vehicle’s registered owner.” This means companies such as Turo or Getaround, which allow people to rent out their personal cars to others, would be considered rental car companies if Gov. Bruce Rauner signs the bill into law.

If designated as rental car companies, Turo, Getaround and any other peer-to-peer carsharing companies would be required to abide by the tax and regulatory burdens included in the Automobile Renting Occupation and Use Tax Act. This includes a 5 percent tax from the state on both the company and the individual renting from the company. The redefinition would also make these businesses pay new taxes at the county and municipality level, and obtain “certificates of registration.” 

It’s clear that the proposed legislation is largely an attempt to secure the interests of large rental car companies that perceive new carsharing services as a threat to their dominance in the industry. Hertz and Enterprise Holdings have both filed witness slips in support of the new restrictions.

Companies like Turo and Getaround provide creative alternatives to often expensive and inconvenient car rental options by allowing individuals to simply rent cars amongst each other. Affordability is a particular concern in Chicago, as the city is ranked as having the highest travel-related taxes in the nation. These platforms also have the potential to provide spillover benefits for Illinoisans living in congested areas, as academic research on carsharing has shown that it reduces car ownership, car use and emissions.

Traditional car rentals involve rather ludicrous tax burdens in Chicago, including a 6 percent countywide tax from the Metropolitan Pier and Exposition Authority, a $2.75 per rental period tax from the city and a 9 percent personal property lease transaction tax. Illinois should not only refrain from imposing additional tax burdens on innovative carsharing companies, but also alleviate the tax burden experienced by conventional car rental companies.

Rather than being enthused at the prospect of being a hub for innovation and development, state and local governments in Illinois have often opted to appease legacy industries at the expense of consumers. Chicago’s continued attempts at burdensome regulations and fee hikes on companies like Uber and Lyft, as well as its cumbersome rules surrounding homesharing platform Airbnb, are indicative of this disdain towards innovation. A 2014 city ordinance banning commercial advertising within ridesharing vehicles drove the company Vugo, which facilitates such advertising, out of Chicago.

Instead of imposing additional burdens on Illinoisans and potential visitors, the General Assembly should embrace innovations offered by companies such as Turo and Getaround, and work to lower the financial burden experienced by car rental companies and their clients across the board.

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