Law vs. the Sharing Economy

Originally published on Tumblr.

The impact of laws takes up a lot of my mind-space. Back when OP3Nvoice was called Calltrunk, I spent a lot of time thinking about call recording laws. A few weeks ago I wrote about the slow pace of legal change, and its impact on scientific research. Since the Super Bowl was played between two teams from States that have legalized marijuana, I’ve been wondering about State vs. Federal laws. Recently Ive been worried about the sharing economy being strangled at birth by outdated laws, overzealous legislators, and powerful incumbents.

We’ve all read about the problems Uber has in France, and the problem AirBnB has had in NY. In fact, both Uber and AirBnB have faced legal battles in many jurisdictions. These are big battles, and thankfully well-funded companies have the means and will to fight them.

But what happens to individuals – the fuel of the sharing economy – who get caught in the cross fire? Some get hurt, some retreat, and some never engage. Would you rent out your East Village apartment for $100/night after your neighbor was fined $2,400? A lot of people wouldn’t. Sometimes, though, the barrier that prevents sharing isn’t the legality of the act, but the tax reporting burden. I hadn’t thought of this until the other day.

I explained to someone I’d recently met that I’d decided where to live in Austin by staying in various AirBnBs throughout the city, in order to understand the pros and cons of each neighborhood. She like this idea and said that she’d thought of renting out her spare bedroom on AirBnB, but had decided against it because of taxes. She didn’t mind paying taxes, but she didn’t want to have to deal with the paperwork. Her Federal tax return is simple because she has a normal job and no other income. She knew that adding AirBnB income would mean more forms, and probably the help of an accountant. Texas has no income tax, but she was worried that she might be liable for hotel tax. So her spare bedroom never made it into the market. She’s surely not alone.

AirBnB is a simple case, because it’s rental income, i.e., cash for a good. Barter is more complicated, because the value to be taxed is difficult to quantify. As this new economy evolves, I suspect that a lot of transactions will move from exchange of cash to exchange of good or service. I’ll be interested to see how our legal systems deal with this.

Despite my short-term worries, I’m very optimistic. The emergence of the sharing economy is unstoppable. Too many people benefit from it already, and more join every day.