My brother got married last week. The wedding was great, and I performed my primary function in making sure my brother showed up on time, sober, and wearing pants. Part of the experience was a massive exercise in regulatory arbitage. My brother and his wife are not quite coastal hipsters (he works a job with a real title) but they were using AirBnB, Uber, Lyft and half a dozen other web enabled sharing services.
My old public finance training kicked in with fear. Fundamentally these services are exploitation of regulatory arbitrage. AirBnB is effectively a hotel booking system where they are claiming they are not offering hotel like services. My brother and his wife had rented a condo where the owner lives three time zones away and rents it out via AirBnB for forty eight weeks a year. The owner has a system of services to clean the condo and maintain security on it. It is effectively a hotel room for half the price of an equivilant room three blocks away. A good portion of the price differential is because the AirBnB room is not paying for half a dozen significant hotel based taxes. There was no convention center fee, there was no general county tax, there was no ball field bond sinking fund fee.
We used Uber for everything. Again, Uber claims that they are merely a sharing service and not a taxi company. This allows them to avoid buying medallions, avoid paying for football stadium construction, avoid paying for some types of insurance.
My public finance nerd came out as I know so many municipalities and counties have depended on levying significant taxation on hotels, taxis and rental cars in order to fund major regional infrastructure and “nice to have” projects such as stadiums. Locally, there is a significant per-room hotel tax for the convention center, and the convention center bonds are limited obligation bonds for the county where there is no general revenue that the bond holders can claim. What happens if Uber, AirBnB and other internet enabled services that exist as regulatory and taxation arbitrage schemes proliferate nationally and take massive market share instead of being the domain of hipsters and quasi-hipsters like my brother?