An independent study commissioned by the Colorado Lodging and Resort Alliance (CLARA) shows a proposal to tax Colorado homeowners will have a net negative impact on total state and local tax revenues

DENVER, CO - JANUARY 24, 2024 - The Colorado Lodging and Resort Alliance (CLARA) today released a new economic report concluding that Senate Bill 33 threatens approximately $1.36 billion in visitor spending per year and 8,100 tourism-related jobs in Colorado, in addition to a net reduction in total state and local tax revenues. SB 33 would reclassify certain homes used as short-term rentals as lodging properties, instead of residential, for purposes of property tax assessment, dramatically increasing the tax rate on these private residences by as much as 400%. The report was conducted by the independent economic research firm Laffer Associates, headed by renowned economist Dr. Arthur B. Laffer.

“This report clearly shows that the proposed excessive tax increase not only penalizes Colorado homeowners who share their home to earn supplemental income but also threatens Colorado’s economy and communities,” said Johannah Richards, Executive Director of the Colorado Lodging and Resort Alliance. “The impact extends to the broader tourist economy and local governments, with anticipated reductions in the bed base leading to declining visitor numbers and diminished local tax revenue. These consequences also extend to small businesses, including retailers and restaurants, underscoring the interconnected nature of our economic ecosystem. In response to these concerns, we vehemently oppose SB 33, and call on lawmakers and Governor Polis to reject this proposal.”

“While the Colorado Legislature's intent is to increase tax revenues, Senate Bill 33 completely misses the mark,” said Dr. Arthur B. Laffer. “Taxes should be raised in the least economically damaging fashion possible. SB 33 fails to take into account the incentive and dynamic effects of tax increases, and would decrease total state and local tax revenues while negatively impacting Colorado homeowners and the state’s tourism economy.”

According to the report by Laffer Associates, proponents of Senate Bill 33 have dramatically overstated the measure’s tax revenue projections by not factoring in homeowners who would reduce the number of nights they share their homes to avoid the additional tax increase, which 89% of existing short-term rental owners say they’d do, according to survey data. Homeowner responses to the tax increase would result in an estimated 56% drop in total short-term rental nights booked per year and an estimated loss of $1.36 billion in annual tourist spending in Colorado. Given the predicted drop in overall travel and spending, the report concludes SB 33 would lead to a net loss of tax revenue for the state of Colorado.

# # #

The Colorado Lodging and Resort Alliance (CLARA), is a statewide coalition of professional property managers, vacation industry operators, employees, and supportive organizations dedicated to advancing fair and effective policies that enhance industry standards and best practices to stimulate the economic impact of Colorado’s tourism industry. The group works to strengthen and unify the voice of the industry in discussions with local, state and federal policymakers to develop fair and effective regulations that benefit Colorado’s communities and vacation rental market.

Dr. Arthur B. Laffer is the founder and chairman of Laffer Associates, an economic research firm based in Nashville, TN. Dr. Laffer was a member of President Reagan’s Economic Policy Advisory Board for both of his terms (1981-1989). In 2019, Dr. Laffer was awarded the Presidential Medal of Freedom.