Renting a private house through sites like Airbnb will remain tax-free in Massachusetts after lawmakers abandoned a plan to extend hotel levies to short-term private lodgings.
The Airbnb meaure was not included in a key economic development bill that emerged late Sunday night after marathon negotiations between House and Senate lawmakers.
The plan’s defeat wasn’t a huge surprise: Governor Charlie Baker previously said he didn’t want to raise taxes on private rentals, and House lawmakers didn’t include a similar plan in their economic development bill.
In a twist, Airbnb, a fast-growing online service that lets people rent their spare rooms and vacation homes, had lobbied for the tax.
Senate officials said the short-term rental taxes would have raised up to $20 million per year to help pay for an expansion of the state’s earned income tax credit, which helps low-income families and is one of Baker’s policy priorities. The tax extentions would have also applied to private vacation homes rented through other sites such as VRBO.com.
As the Legislature raced to its final deadline, San Francisco-based Airbnb aired radio ads and ran a social media campaign seeking to sway lawmakers to support the tax. But it wasn’t enough to overcome stauch opposition from Baker as the clock expired.
“I am disappointed that, despite Airbnb’s clearly expressed support, the governor and House did not agree to support this modest tax to help our working families,” Senate President Stanley Rosenberg said.
House Speaker Robert DeLeo did not immediately respond to messages seeking comment.
“Governor Baker believes the earned income tax credit (EITC) is an effective tool for supporting Massachusetts’ hardworking families and individuals, was pleased to sign a 50 percent increase for the over 400,000 who are eligible and looks forward to working with the legislature in the future to assist working families without raising taxes,” spokesman Billy Pitman said in a statement.
Hotel stays are subject to a bundle of state and local taxes—in Boston, they add nearly 15 percent to a bill. But renting a private residence isn’t taxed.
The state’s hotel and motel owners have argued that, as a matter of fairness, private short-term rentals should be taxed and regulated like traditional lodgings.
Airbnb, which boasts more than 2 million private rentals, doesn’t want its hosts regulated as strictly as hotel owners. It has fought efforts for heavier oversight in New York and San Francisco, for example.
But the company has embraced the idea of charging hotel taxes on its stays, and already collects local taxes in several states.
The plan was complicated last week when Baker reversed his previous support for the measure, saying that he wasn’t in favor of settling business disputes by raising taxes. Baker also objected to the notion that vacation homes on Cape Cod and the islands would be taxed at the same level as hotels.
The Senate plan would have upped the earned income tax credit from 23 percent to 28 percent, while restricting full benefits to people who live in Massachusetts year-round. But Baker argued that, even with the benefit restrictions, the Airbnb tax wouldn’t fully pay for the tax-credit expansion in its first year.