California’s AB 5, a law that took effect on Jan 1 of this year, heavily restricts workers who want to be contractors rather than full employees. The impact of AB 5 was to disenfranchise workers around the state who lost paying work and an honest income. Self-employed Californians were unnecessarily restricted to empower outdated and unaccountable unions. The backlash was huge.
Today, NetChoice pushed Congress to reject the Protecting the Right to Organize (PRO) Act because it threatens workers’ livelihoods within the growing peer-to-peer economy.
“Workers join the peer-to-peer economy because they’re looking for a flexible way to make a living. The PRO Act would restrict the right of self-employment, deny workers’ choice of when and how they want to work, and make it harder for Americans to find work that best serves their family,” said Carl Szabo, Vice President and General Counsel at NetChoice.
“The internet enabled a surge in self-employment through online services like Lyft and Thumbtack, while the PRO Act would wrest control and opportunity away from workers.”
The biggest of those loopholes is the simple fact that rental car companies are exempt from paying sales tax when they buy new vehicles. According to a report published this week by NetChoice, that sale tax exemption saved rental car companies more than $3.5 billion last year. In California, where other residents have to pay a 7.25 percent tax on the price of a new car, that tax break saved rental car companies more than $676 million in 2019.
That sweet deal isn’t available to users of Turo or GetAround. Good luck telling your state that the reason you didn’t pay your vehicle sales tax bill is because you plan to rent the car as a side hustle.
“State governments hand out billions to companies like Enterprise and Hertz, providing them an unfair advantage over competitors, like peer-to-peer car-sharing services,” says Steve DelBianco, NetChoice’s president.
The NetChoice report also examines the so-called “vehicle license fees” tacked onto the cost of renting a car through traditional platforms such as Enterprise or Hertz. Consumers probably don’t think about that fee as anything different than a tax—but in reality, it simply provides additional revenue for the rental car platform and does not go to local or state governments.
Study Exposes Unfair Tax Benefits for Car Rental Industry that are not available to Peer-to-Peer Car Sharing
WASHINGTON – NetChoice, a trade association fighting for free enterprise and free expression online, today released a report on the unfair benefits the Big Car Rental industry receives at the expense of taxpayers and consumers.
Despite consistent revenue growth and profitability, the rental-car industry, including big companies like Enterprise and Hertz, receives tax benefits costing over $4 billion to U.S. taxpayers and consumers annually, the report shows.
“Our study highlights the extraordinary government favors granted to the car rental industry,” said Steve DelBianco, President of NetChoice.
“The tax breaks, loopholes, and subsidies analyzed in our report are a boon for big car rental companies, who receive over $4 billion in state-sanctioned benefits annually. State governments hand out billions to companies like Enterprise and Hertz, providing them an unfair advantage over competitors, like peer-to-peer car sharing services.”
According to the NetChoice study, the car rental industry receives:
- A sales tax loophole costing taxpayers $3.5 billion every year
- A vehicle registration fee subsidy costing customers $650 million each year
Key analysis in the report shows:
Passing-on Vehicle License Fees is intentionally misleading to consumers
- The fee, placed next to sales tax on a car rental bill, leads consumers to think that money is being given directly to the state, when it goes directly to the car rental company’s bottom line
- The only example of somewhat similar fees is in highly regulated public-utility companies — very different than the car rental industry
Big Rental is asking government to help eliminate competition from peer-to-peer car sharing service
- A recent survey of rental-car operators revealed that “competition from peer-to-peer networks” ranked as one of the top self-reported threats in 2020
- These peer-to-peer car sharing services don’t receive the same state-granted benefits as the car rental industry
- The car rental industry is lobbying the government to regulate peer-to-peer car sharing like traditional car rental companies, even though they would not receive the same state-granted benefits
The full report can be found here.
NetChoice is a trade association fighting to protect free expression and free enterprise online. Described by Politico as “Silicon Valley’s most aggressive lobbying presence in Washington,” we advocate at the local, state, national, and international levels, working with the tech industry, lawmakers, and academia.
Your editorial “California Runs Off the Road” (Jan. 24) highlights the many problems California’s new AB5 law has caused for employees across the state. The overregulation of independent contractors, resulting in the persecution of freelance journalism in the state, has led to hundreds of journalist layoffs. Lower advertising dollars or decreased readership isn’t the cause.
Though the editorial notes that the American Society of Journalists and Authors and the National Press Photographers Association are both challenging the law for abridging free speech, many journalists and media entities initially celebrated the passage of AB5. News sites like Vox Media celebrated that independent contractors in California will “get basic labor rights for the first time” under AB5. Then a mere three months later, Vox Media announced the layoff of hundreds of freelance journalists due to AB5’s additional costs of using freelance reporters in the Golden State.
While some blame tech for destroying America’s press industry, tech actually made it easier for freelancers to become journalists and news photographers. Perhaps a better cause of the decimation of journalism is the anticontractor activists, the demonization of where and when a person can work and laws like AB5 that are decimating local journalism.
NetChoice president Steve DelBianco said: “If homeowners want to host paying guests, they need to understand concerns raised by neighbours and local government officials, and be ready to respond with real data and smart policy solutions. That’s why this playbook is an indispensable resource.”
Ask any American about the American Dream and you’re likely to hear about home ownership. And if that American is a Millennial, like me, you’re likely to hear that home ownership remains just that: a dream.
But even for those Americans who do own homes, what started as a dream can quickly become a drag. That’s because most homes come with 30-year mortgages attached to them. And in places with high income taxes and high property taxes such as Maryland, homeowners often struggle to stay afloat.
New Jersey’s Department of Labor slapped Uber with an astronomical $650 million fine last month. Why?
It seems the state has decided that Uber drivers aren’t contract workers, but rather, employees. For those very drivers, it was shocking news.
So it goes, the Garden State taxed Uber, seeking to morph Uber drivers into employees. The government, too, is looking to backdate that change so that the company owes the government income taxes from its previous years of operation. But this forced reclassification threatens a thriving marketplace that has served both riders and drivers tremendously. It’s the same kind of initiative that’s been tried on the West Coast — this year, California passed a law that will reclassify as employees a huge number of contractors across the state.