Carsharing

Abstract

With the increase in carsharing (sharing of motor vehicles through memberships in non- and for-profit enterprises) has come extensive analysis of the environmental, economic, and social benefits that result from vehicle-sharing programs. Although the research suggests that the public benefits are significant, public policy has not always supported the sector's growth, particularly in taxation. In this study a cross-section analysis of taxation rates in 82 U.S. cities was performed to foster understanding of the implications of taxation on the sector's expansion. Findings showed that taxes on carsharing services generally exceeded local taxes on sales, as well as taxes on other forms of passenger transportation. Nationally, the average tax was 17.93% for 1-h reservations and 14.08% for 24-h reservations. By comparison, sales taxes in cities with carsharing services averaged just 8.06%. In seven of the 25 largest cities in the study's sample, taxes on 1-h reservations exceeded 30%. Such taxation resulted in an estimated 11.7% reduction in carsharing use and a proportional drop in net social benefits. Such social losses can be avoided with policies that provide targeted tax waivers for neighborhood carsharing organizations that compile information (assembled and certified by a third party), which shows that the organizations provide services that meet clearly articulated criteria, and that the organizations generate significant benefits to the community at large. Several major cities, including Boston, Massachusetts; Chicago, Illinois; and Portland, Oregon, have created definitions for such organizations, which are used to exempt them from certain taxes.