On March 31, 2016, a transportation enforcement worker watches ride-sharing vehicles pull into their spaces at Seattle-Tacoma International Airport, the first day they could legally pick up and drop off customers there.
A transportation enforcement worker watches ride-hailing vehicles pull into their spaces at Seattle-Tacoma International Airport on March 31, 2016, the first day they could legally pick up and drop off customers there. Ted S. Warren/AP

Don’t Enact a ‘Lazy’ Ride-Hailing Tax

A former mayor of Portland, Oregon, outlines what a smart ride-hailing tax looks like for American cities.

There’s a transportation revolution now underway that will likely disrupt our cities as much as—or even more than—the widespread proliferation of personal cars that began in the 1920s. Back then, cities weren’t ready for the rise of automobiles; they were unable to act or waited too long to establish the kind of regulations and policies that could have mitigated the negative effects that car ownership unleashed on urban spaces. We can’t afford to do that for this new round of transportation disruption.

Ride-hailing services like Uber, Lyft, and Via are already changing the way we get around cities, and not always for the better. When autonomous vehicles arrive and driverless ride-hailing takes over, this new service—if left unchecked—could accelerate urban inequity, deepen the affordability crisis in central cities, and speed suburban sprawl.

But local government leaders can shape this urban transportation revolution: Cities need to tax ride-hailing trips and get it right the first time, because transportation taxes, once in place, are fiendishly hard to change. I know this from experience: I’m a former mayor of Portland, Oregon. That’s the state that birthed the nation’s first and much-emulated bad gas tax, which was unindexed-for-inflation.

So far, only a few cities and states have enacted taxes on transportation network companies (or TNCs) such as Uber and Lyft. Uber first released its app in 2010, yet it took eight years for the nation’s first two-tiered ride-hailing tax to be enacted, by the New York State Legislature, for Manhattan. Last month, the U.S. Conference of Mayors voted to encourage Mayors to look at taxing ride-hailing trips, but the cities still have to design, approve and implement such a tax. Voters in Oakland and San Francisco are likely to have ballot initiatives on adding fees to TNCs to weigh in on in November, while New Jersey has just passed a statewide bill that imposes a 50-cents-per-ride fee on ride-hailing companies. We need to pick up the pace—but carefully, because a lazy ride-hailing tax isn’t worth it.

A tax is “lazy” if it basically just collects and spends revenue, when it could do much more good for cities. Cities need a tiered ride-hailing tax—one that rewards carpool riders, for example, and also includes policy safeguards for equity provision of service, congestion-like pricing, and a market-based approach.

A smart ride-hailing tax can accomplish a number of important goals, from reducing congestion and associated climate-warming emissions to addressing transportation inequities that afflict residents in poorer neighborhoods. Such a tax would have two basic policy requirements. First, ride-hailing services should be forced to give cities their ridership data regularly. Fresh-flowing data allows for audit compliance and ongoing policy improvements in real-time. The second basic requirement is to make sure some of the taxes, fees, and surcharges are placed on the ride-hailing firms in a way that cannot be easily passed down to the company’s drivers, who deserve our support.

In addition, here are six ideas to help ensure the full-benefits of a tiered ride-hailing tax and address the most likely downsides:

  1. Give the deepest tax discount to services that function more like buses: A service like Uber ExpressPool has the most benefits of traditional carpooling, plus it reduces vehicle miles traveled because people have to walk a block or two to get picked up and dropped off. Also, it helps address the problem of “deadheading”—circling empty ride-hailing cars.
  2. Require a carpool option: While ride-hailing services operate in most larger cities, not all of them offer a pool option: Ride-hailing firms should be required to offer a carpool option or pay an empty-seat fee.
  3. Charge cars that fail to meet efficiency standards: The Obama Administration introduced a set of gas mileage regulations that they forecasted would produce savings comparable to lowering the price of gas by $1 per gallon by 2025. Trump rolled back these goals—but cities can help bring them back, at least in part. It can be levied in the form of an annual fee on the ride-hailing companies, on the fleet miles driven by dirty cars.
  4. Use taxes to ensure equitable 24-hour citywide coverage: The ride-hailing industry’s equity record is somewhat mixed. A recent UCLA study showed that Lyft was providing mobility for car-less residents in lower-income parts of Los Angeles. But Via, the full-time carpooling company, was recently exposed for refusing to pick up and drop off in some Washington, D.C., neighborhoods. Cities should require companies to serve areas with scant public transit and fine companies that fail to comply. These areas are often already public transit deserts, or places where the working poor spend too much of their income on commuting. Cities should also require firms to provide 24-hour coverage and ensure ride-hailing adequately serves vulnerable older residents and people with disabilities. There are good examples of such programs in Boston.
  5. Reward ride-hailing firms for providing transit first- and last-mile services: We can take lessons from cities like Los Angeles, Philadelphia, and Oakland, where they partner with TNCs firms to pick up transit riders at stops to provide them a discounted ride for the last mile.
  6. Keep key streets unblocked: To prevent congestion triggered by ride-hailing vehicles that block travel lanes while picking up and dropping off passengers, cities need to rethink how they manage their curb space: That should involve creating dedicated drop-off zones that TNCs can pay an annual fee to access. Cities already do this for hotels check-in and -out loading zones.

There are many restrictions facing cities in their efforts to regulate issues like carbon emission and traffic congestion. Most American cities lack the local authority to close coal plants or toll local freeways. But with ride-hailing services, many cities do have the legal ability to establish taxes and regulations, either on their own or in partnership with state legislature. Cities need to assert that authority—before it’s too late.

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