NEW: Modernizing rental car and peer-to-peer car sharing taxes for a post-pandemic future: buff.ly/3xbDjxP @GS_Watson 
As state economies reopen and travelers consider options for their first travel experience since the pandemic started, states should ensure that their tax codes and revenue options don't stand in the way of a robust recovery.
Unlike other excise taxes, rental car excise taxes are not imposed to reduce a harm/ensure drivers are paying for infrastructure. Rather, revenue is used for unrelated purposes and the taxes create a byzantine structure of taxes/fees that dissuade travelers from using rental cars
States relying on rental car excise taxes experience lower economic growth when travelers adjust their behavior to avoid the tax.
While some policymakers may view car rental excise taxes as a viable revenue source by shifting the tax burden onto nonresidents, these taxes harm residents by driving up the price of local rental cars and curtailing economic growth.
The economic evidence shows that travelers and tourists are sensitive to price changes for rental cars and adjust their behavior to avoid the tax, harming state economies and the travel sector right as the industry is trying to recover from the effects of the pandemic.
The debate over whether rental car excise taxes should apply to peer-to-peer car sharing firms is unlikely to end soon, but there is a lesson to be learned from those fights.
States with broad, equitable tax bases that apply to all actors are less likely to be affected by industry lobbying, have fewer economic distortions in their tax codes, and have lower administrative costs.
Instead of looking at how rental car excise taxes can be extended onto new business arrangements, states and localities should ensure that rental car and peer-to-peer car sharing transactions are incorporated into the sales tax base and repeal targeted excise taxes.
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