Cleveland Considers Taxing Airbnb Rooms Like Hotels

Published September 13, 2015

City officials in Cleveland, Ohio are considering redefining the city’s tax laws to collect excise taxes from Airbnb customers and consumers of other sharing-economy businesses.

If enacted, visitors to the “Rock and Roll Capital of the World” staying with Airbnb hosts would have to pay the city’s 3 percent hotel tax.

Greg Lawson, a policy analyst at the Buckeye Institute for Public Policy Solutions, says this plan would tax Airbnb hosts twice.

“What’s kind of striking about this is that the folks who host are sending 1099s, so they’re already paying income tax on this,” Lawson said. “They’re paying income tax to the feds [and] they’re paying income tax to the state.”

‘Opening the Door’ to Regulation

Lawson says taxing services such as Airbnb is the first step along the path to regulating or banning it.

“Whenever you start implementing these kinds of taxes, you start opening the door to an awful lot of regulation, and the whole thing of the sharing economy is that there is a broad technical platform that allows people to make decisions for themselves, what they want to do with their own assets,” Lawson said.

“We don’t need the government to come in and try to regulate it, and taxes are sort of the camel’s nose into the tent toward further regulation,” Lawson said. “That’s really the whole problem: It’s government looking in every way, shape, or form to have its hands out and reaching into peoples’ pockets all the time, nickel-and-diming folks.”

Market Space Invaders

Adam Smith, an associate professor of economics at Johnson and Wales University, says the peer-to-peer economy is invading a market traditionally guarded by regulators.

“Across the country, we are seeing platforms like Uber, Lyft, and Airbnb [invade] a space that is currently being taken up by this kind of—I could be dramatic and call it a nefarious pact—but it’s kind of just an arrangement between municipalities and local companies, be it cabs, housing associations, whatever.”

Smith says lawmakers should encourage the peer-to-peer economy’s growth, instead of fighting consumers.

“This is happening right in front of us, and it’s popular, you know,” Smith said. “People like it. Everybody likes it!”

Amelia Hamilton ([email protected]) writes from Traverse City, Michigan.