MY LAST NERVE: Why Must We Make Everyone Equally Overregulated?

July 31, 2015

Inside Insight

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HOTELS AND ONLINE RENTALS, TAXI CAB COMPANIES AND UBER, ETC.

South Carolina politicians are all about jobs – as long as they’re the ones “creating” them, regulating the industry they’re in, and taxing the goods and services the jobs produce.

In 2014, when Uber rolled into Columbia, Charleston, and Greenville, consumers were pumped. We now had a safe, affordable, and transparent transportation option that we could access from our smartphone. We could share the fare with our friends, know who was picking us up before they ever arrived, and rate the driver on his/her service.

Amazing.

But government officials were quick to put a stop to all the celebration. Law enforcement, regulators, and even some politicians condemned the company for operating without proper permits, not carrying the proper level of insurance, and so on. The state went so far as to issue a cease-and-desist to Uber.

In the end, though – and once elected officials began to appreciate the reality that people actually like the service Uber provided – lawmakers were able to create a web of laws and regulations that allowed Uber (and similar ride-sharing companies) to legally operate in South Carolina. Unfortunately, however, in their eagerness for the quick fix, lawmakers completely blew the opportunity to deregulate a grossly overregulated industry. They had the chance to lift regulatory burdens from this industry and allow or encourage it to compete with newer, more innovative companies, but they chose instead to put the same dumb regulations on everybody.

The next soon-to-be victim of lawmakers’ heavy regulatory hand, according to a report in the Charleston Post and Courier, is a company called Airbnb. Its website describes the company as “a community marketplace where guests can book spaces from hosts, connecting people who have space to spare with those who are looking for a place to stay.” Airbnb connects people with space to rent on a short or long term basis with people who need a place to stay and aren’t interested in a traditional hotel.

The Post and Courier report correctly states that lawmakers in both chambers have filed legislation to “require South Carolinians who lease rooms in their homes to overnight guests through websites like Airbnb to pay taxes, just like other lodgings.” The third party, such as Airbnb, is liable for remitting the tax. The tax rate will be similar to what the locality charges a hotel. Susan Cohen of Charlestowne Hotels says these types of taxes help everybody because “they go specifically to help promote tourism.”

Well, count me as unpersuaded that anybody has any clue where all that hospitality tax really goes.

In any case, however, the “hospitality industry” (or at least its alleged representatives) have asked lawmakers to regulate its potential online competition, and a number of lawmakers have obliged.

In this case, at least, our state politicians are behaving like parents, and traditional businesses are their children – it’s their job to protect them. Business groups complain to the politicians because their members say they’re losing clientele to a newer, fresher, more tailored business-model. Rather than make the perfectly reasonable request to lift a tax that has become unfair, these industry representatives ask the politicians to punish everyone equally.

The only ones who really get punished, though, are the taxpayers – the family trying to recoup money they’re spending on a rental house while their child is on summer break from college, or the couple trying to make a few extra bucks by renting a room to tourists.

And of course, given the choice between deregulating an industry and letting the state rake in more revenue, politicians will choose the latter.

Rarely, if ever, do our lawmakers seize an opportunity to deregulate an industry and create a level playing field for all. To South Carolina politicians, a level playing field means a playing field where everyone is overregulated, overtaxed, and where the entrepreneur has the deck stacked against him. Why must it always be this way?

Jamie Murguia is Director of Research at the S.C. Policy Council, The Nerve’s parent organization.