Rahm’s proposal would push Chicago Airbnb taxes above 23 percent

The mayor’s proposed 2 percent fee would punish short-term rental customers and providers.

Chicago Mayor Rahm Emanuel has called for another tax hike on short-term room rental services, such as Airbnb. Just two years after pushing through a similar 4 percent surcharge on short-term rental platforms, Emanuel is eyeing an additional 2 percent fee earmarked for shelter beds for victims of domestic abuse, according to the Chicago Sun-Times.

The 4 percent surcharge users already pay comes on top of the city’s combined 17.4 percent hotel accommodations tax. If City Council approves this latest fee increase, Chicago’s overall tax on short-term room rentals would spike to 23.4 percent.

This 2 percent hike would only further punish visitors to the city, who already pay the some of the highest travel-related taxes in the nation. It would also disadvantage providers of short-term room rentals in need of supplemental income. This latest proposed tax hike on the “sharing economy” comes following a recent measure advanced by the General Assembly that would subject peer-to-peer car-sharing services to traditional car rental taxes.

It’s clear too many lawmakers have prioritized industry incumbents over innovation – despite its potential to lower the financial strain on businesses, residents and prospective visitors alike. Recent hospitality industry lobbying might explain some lawmakers’ protectionist tendencies. In the 12 months prior to Chicago City Council approving the initial 4 percent fee, the Illinois Hotel & Motel PAC donated more than $30,000 to Chicago aldermen and their ward organizations, according to the Illinois State Board of Elections.

Some Chicago aldermen have gone a step beyond tax hikes, pledging to ban Airbnb and similar services in their precincts. For example, Alderman Marty Quinn, 13th Ward – who shares an office with House Speaker Mike Madigan – has floated a series of measures that would eliminate short-term room rentals within his ward. Alderman Michael Zalewski, 23rd Ward, has also sought to ban such platforms in his district. Zalewski and Quinn represent areas of the city that border Midway Airport to the north and south, respectively, meaning their constituents are advantageously positioned to provide short-term room rentals to inbound travelers.

While the city has revised some of its earlier regulations on short-term rentals to comply with a 2015 U.S. Supreme Court decision, restrictions still include a $10,000 license and a $60 per-unit fee – in addition to the current 4 percent tax.

Instead of prioritizing legacy industries, state and local lawmakers alike should explore ways to attract investment and reduce residents’ sky-high tax burden.