The Colorado legislature nearly imposed yet another tax on a fast-growing industry in Colorado—Airbnb. Thankfully the measure isn’t going anywhere… for now.
Since its founding in 2008, Airbnb cited a seasonal user increase of over 17 million between the summer of 2010 and this past summer. Currently, because these operations are taxed as residences, owners have been able to maintain a competitive price in the budding industry. To increase state revenue, the draft bill would have required owners of short-term rentals to pay commercial property tax rates for every rental.
The Gallagher Amendment enacted in 1982 determined the guidelines for quantifying the value of property and the valuation of assessment for property in the state. The rates are then used to determine taxable property value, which in 2018 set residential property at 7.2% and commercial at 29%. By taxing short-term rental operations as commercial property instead of residential, the State would have imposed a 22% tax increase on Coloradan communities renting their homes through Airbnb for additional monthly income.
Short-term rental host Michael Socha stated that, upon approval, the family “would have to completely re-look at whether we want to do this, and we may have to sell our house because we bought our house and have a mortgage with a specific amount thinking we would be able to make that amount to be able to live.”
Airbnb representative Molly Weedn concurred, adding that the “proposed change could mean much of this important supplemental income would go to state coffers, rather than helping a host pay their bills.”
The committee decided against forwarding the bill to the General Assembly because its intended revenue goal would not be met fast enough. Given the massive burden the draft bill would have placed on Coloradans, the State legislature should rightfully avoid bills that will impose additional costs to families and local entrepreneurs that will dis-incentivize or decrease the profitability of conducting business in the State.