As with regulation, some people are opposed to taxes. Other people are fine with taxes—usually with imposing taxes on others. In general, though, people prefer to not pay taxes. As such, it is hardly a surprise that the companies running the sharing economy try to avoid paying taxes. On the face of it, companies like Airbnb and Uber profess they are just providing a way to connect people to pay for goods and services. This can be seen as a more organized version of the old informal sharing economy in which people sublease, rent out property, or get gas money to drive a friend to the airport.
The old informal economy often operates without taxes being paid (although this is not always done legally). For example, if Professor Sally informally rents her house to her grad student Bob while she is in Europe, Professor Sally and Bob will probably not pay taxes for this—although they would if Bob was renting a room at a hotel Sally owns. While there are probably people who would like taxes paid on even informal transactions, the informal nature of such transactions often makes this impractical. The traditional informal sharing economy is small and decentralized so taxing it would probably be cost prohibitive. There is also the legitimate concern that such private transactions can fall outside of the domain of state concern.
However, when a company such as Airbnb gets involved, things change. The once informal economy becomes centralized around companies and there is also an increase in the scale of operations. After all, it is one thing if Professor Sally’s grad student is paying a modest fee to stay in her house while she is in Europe, it is quite another if Professor Sally starts running her house as a hotel. It also becomes a different matter if the number of people renting out property increases significantly. There would seem to be three important changes between the informal sharing economy and the new sharing economy. The first is centralization. Instead of people reaching informal agreements as individuals (who often know each other), there would be business transactions through a central company. The second would be the character of the process—short-term renting via a company is closer to the hotel model than to the old informal model. The third would be the number of people involved: the sharing economy would presumably be larger than the old informal economy.
From a practical standpoint, having a centralized company and a large operation allows the collection of taxes to become much more practical. This can justify taxing the sharing economy like other businesses.
From a moral standpoint, if it is acceptable for businesses with the same model (such as the traditional hotel) to be taxed in a certain way, then the same would apply to the new sharing economy. So, if Sally would have to handle taxes if she ran a traditional hotel, then she should have to do the same if she ran her sharing economy hotel through a service like Airbnb. Or perhaps Airbnb should be the one to handle the taxes.
Naturally, it might be wondered why taxes should be imposed on the new sharing economy—even if the new sharing economy is similar to the old economy. Of course, the people who make money through sharing rides or apartments do pay taxes for that income. However, there was some controversy over services like Airbnb paying the hotel tax.
One reason for sharing companies to pay taxes and fees like traditional companies is fairness. After all, the free market is not as free if some companies enjoy special breaks. Although, to be fair and balanced, the American economy is built on special breaks. Another reason is that the taxes and fees are needed to pay the public services and infrastructure that such companies (and their sharers) utilize. It might be contended that this is already covered by the income taxes paid by individuals engaged in sharing. However, by that logic, businesses would also be exempt from taxes and fees on the grounds that their employees pay taxes. Which would certainly appeal to businesses that pay taxes.
Also, the growth of the sharing economy imposes new costs on the community like having a similar new business. For example, having many Uber drivers is like adding a large cab company. As another example, having Airbnb rentals in a community makes the area more like a hotel zone, with the accompanying burden on the community. As such, if the community (which includes those who are not part of the sharing economy) faces increased costs then it is acceptable to pass these costs on to those who benefit from this new economy.
There is also the cost of regulating the industries. As noted in my previous essay, when the sharing economy becomes comparable to the normal businesses (such as hotels and cab companies), then comparable public good (such as safety) regulations should apply. Naturally, these come with costs, and it makes sense that the costs should be connected to the profits, rather than just be taken from the community. For example, with non-professional drivers acting like cab drivers and people renting out apartments and homes like hotels, there are legitimate concerns about public safety. Cab companies and hotels bear some of the cost of their regulation and so too should the sharing companies.
Naturally, there is the general debate about what is a fair tax or fee and concerns about the impact of taxes on the economy. However, it seems reasonable to believe that the sharing economy is analogous to the non-sharing economy and that it should bear a fair share of costs imposed upon the community.
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