Short-Term Rentals, Long-Term Taxes
Kansas City and Springfield both have hotel tax proposals on their April ballots. In neither case do they propose raising the hotel tax (dare to dream that this were the case for all tax increase votes). Instead, they are seeking to expand the imposition of hotel taxes to short-term rentals, such as Airbnb, Vrbo, and that neighbor lady down the street who rents spare rooms out to minor league hockey players like in Youngblood.
Expanding the tax base makes for good tax policy, and equalizing the tax difference between competitors is also good policy. There is no reason that a hotel should have its guests pay one tax rate while Vrbo guests pay a lower rate. The time period of any theoretical “infant industry” argument is long past. The short-term rental industry is a major part of tourism and hospitality, and it should be treated the same as standard hotels for sales tax purposes.
Of course, I would like to see an expansion of the hotel tax base combined with lowering the tax rate, but saving money for tourists probably isn’t the top priority for local officials. I’ll have to be content with the hope that increased revenue from expanding the hotel tax base will remove pressure to raise the hotel tax rates in the future.
Like marijuana taxes and use taxes, hotel tax expansion can offer a method for new municipal tax revenues in an economically sound fashion. However, cities should not just use these new revenue sources to simply get and spend more money. They can also be used to replace other, more economically harmful taxes. These include local earnings taxes, high commercial property taxes, the ridiculous “economic development” sales tax, and personal property taxes on business equipment. (I am well aware that hotel taxes are usually dedicated to tourism promotion and not as readily exchangeable as use or marijuana taxes, but that is a choice that cities make [and a defensible one], not some order delivered via lightning bolt by Zeus himself that the cities can’t change if they wanted to.)
That would be a trade-off that would truly benefit cities in Missouri.