Letter: Increasing STR tax could hurt Steamboat more than it helps
The proposed tax increase of 9% on short term rentals is for affordable housing, a laudable goal. But targeting only STRs is not the best method and is not in the city’s long-term interests.
In 2019, Steamboat had 500,000 visitors. They spent an estimated $535 million. The city receives $21.4 million sales tax on these expenditures. Including the existing accommodation tax, tourists contribute $22.8 million to the city’s revenue, or 61% of all taxes and assessments.
It’s tempting to “tax those guys” when “those guys” can’t vote. But the proposed tax increase risks having unintended consequences. Here are a few things to consider:
• The targeted tax can drive tourism away. Some permanent residents might find that an attractive thought, but it could damage the Steamboat Springs economy. With the proposed tax, Steamboat will have one of the highest rental tax rates in Colorado. That means higher rental rates, 100% transparent in our online world. Travelers can easily switch to other Colorado markets. The higher tax may not deliver the $12 million expected of it.
• A modest increase in the STR tax might make some sense. If there is a need for additional revenue, increasing the property tax slightly is a fairer distribution of the burden, posing less risk to Steamboat’s vital tourism industry.
• Our low property tax rate (about $15 per $100,000 valuation) benefits those who own property, rented or not. But it really benefits those who own homes worth millions and don’t rent their property. Many of those are part-time residents whose property may be their second or third home. They are getting — if not a free ride — a very cheap ride, enjoying the benefits of Steamboat at very low tax cost.
• As to the impact on lower income property owners, an increase from the current $15 per $100,000 to $50 per $100,000 would increase the tax on a $750,000 property from $112 to $375, a small increase in dollar terms.
• The total city property tax would increase from $1.6 million to $5.3 million, a sizeable increase.
• Increasing the property tax would still distribute a considerable part of the burden to those who rent their residences but would include all property owners (including high-value part-time occupied second or third homes).
• Moderately increasing both the STR tax and the property tax is a better way to finance the city’s objectives.
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