Inside Augusta

Maine should resist taxing the ‘sharing economy’

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The sharing economy, including platforms like Lyft, Uber and Airbnb, present new and unique economic opportunities to the many Mainers who utilize these services. Unfortunately, the Legislature wants to tax these innovative operations out of existence. This session, the Joint Standing Committee on Taxation heard LD 1721, a proposal that would require sellers of online real property rental platforms, such as Airbnb, to register, collect and report sales taxes to the state. The Committee has also moved forward with LD 1805, which contains similar provisions for transient rental platforms.

These bills seek to quell competition and prevent the rise of the sharing economy through regulatory schemes that should not be applied based on the services provided. As goods and services within the sharing economy continue to gain popularity among consumers, regulators increasingly seek to interfere at the behest of entrenched industries looking for protection from their friends in government. Recent regulatory efforts across the country have targeted innovative peer-to-peer businesses, disproportionately affecting the low- and middle-income Americans who are more likely to utilize these services and have the most to gain from the sharing economy.

The sharing economy allows people to be their own boss. It gives working families the flexibility they need to care for their children and still earn a living. It provides low-income earners with services they can actually afford. It offers new entrepreneurial opportunity and a shot at prosperity that some people would not otherwise have. Many peer-to-peer businesses have innovated their respective industries, and the passage of legislation like LDs 1721 and 1805 would hold back those in Maine who are in the greatest need of these services.

According to a paper recently published by the New York University Stern School of Business, peer-to-peer rental marketplaces have a disproportionately positive impact on lower-income consumers. The study found that the sharing economy provides low- and middle-income earners with new economic opportunities and access to more cost effective services. The study concludes that these services show “economically significant improvements in consumer welfare due to the availability of the ’sharing economy’ marketplace, and significantly higher improvements for the below-median income segment.”

Further, those in Maine who provide these services through online platforms like Airbnb already pay their fair share. Whether someone uses Airbnb as their primary source of income or for a little extra money to make ends meet, they are still subject to state and federal income tax and other withholdings, property tax, sales tax, and many other taxes that come as a regular consumer and homeowner. Most sellers through Airbnb rent out their homes for just a fraction of the year, and their short-term renters should not have to pay sales tax for just a temporary stay in someone else’s home. Assessing this tax will make the platform less competitive, which will ultimately hurt low- and middle-income Mainers.

A 2016 survey by the Pew Research Center found that “both users and nonusers [of the sharing economy] strongly support the legality of these services; they also feel that homeowners using these services should not have to pay taxes in order to use them.” Approximately 52 percent of adults responding to the survey responded that these services are legal and users should not have to pay taxes. Among respondents who use home-sharing platforms, 56 percent believe the service is legal and should remain untaxed.

When these proposal reach the floor, the Legislature should resist outside pressures to tax these businesses and allow Mainers to  continue reaping the benefits provided by the sharing economy.

About Jacob Posik

Jacob Posik, of Turner, is a policy analyst for the Maine Heritage Policy Center. He can be reached at jposik@mainepolicy.org.

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