By on August 23, 2016

Uber ride, Image: Jason Tester Guerrilla Futures/Flickr

From the everyone’s a winner! file comes this story. Soon, whenever a Massachusetts resident hails an Uber, the state will hand part of their fare to their direct competition.

Reuters reports that Massachusetts lawmakers are poised to levy a five-cent-per-trip levy on ride-hailing apps like Uber and Lyft — a new corporate welfare initiative that is the first of its kind in the U.S.

Ride-hailing apps like Uber are the nemesis of taxi companies, which operate via a long-standing but inflexible business model. Cities that consider legalizing ride-hailing apps face widespread protests from cabbies, including Toronto, where one cabbie felt like going for a ride on the outside of an Uber sedan.

Often, the go-to plan is to simply regulate the ride-sharing apps out of business. We’re looking at you, Austin, Texas. In Massachusetts, the solution to avoid being seen as a modern, progressive state that shuns new technology and societal trends is to simply tax the new business (so no others suffer). It’s akin to placing a levy on Big Macs to keep the Home of the Whopper™ in business.

Massachusetts governor Charlie Baker signed the levy into law this month, part of a broader package of laws aimed at the ride-hailing. The levy goes beyond just propping up Uber’s competitors. One-quarter of the total levy goes to taxi companies, another quarter goes to the state transportation fund, and half goes to the municipalities.

Naturally, how the state’s portion will be spent hasn’t yet been decided on.

As you might expect, Uber and Lyft drivers aren’t happy about this. Kirill Evdakov, CEO of Boston (and Austin) ride-hailing service Fasten, told Reuters that he doesn’t think operators like himself “should be in the business of subsidizing potential competitors.”

Taxi companies approve of the new laws, though many feel they don’t go far enough. Their default position is that Uber and other such companies operate outside of the law, and should face severe scrutiny from law enforcement and regulators.

The state claims riders won’t see a bump in fees, as the law requires companies to pay the government directly, not through drivers or passengers. Of course, many feel that the cost will surely be passed down to customers. The taxi subsidy part of the fee runs through 2021, after which the 20-cent levy will be split between the state and municipalities until the levy disappears in 2026.

[Image: Jason Tester Guerrilla Futures/Flickr]

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43 Comments on “New Massachusetts Law Hands Part of Uber Fare to Cab Companies...”


  • avatar
    energetik9

    I could live with modest transportation tax, but subsidizing cab companies? That’s the stupidest thing I’ve ever heard.

    • 0 avatar
      28-Cars-Later

      Its for the children.

      • 0 avatar
        energetik9

        Right…for the children :)

        I realize this is only a $.05 fee, but this seems counter to fair business practice. Unless there is some justification or language I am not aware of, there seems grounds for a lawsuit here.

        • 0 avatar
          28-Cars-Later

          $.05 becomes $.50 and becomes $1.50 real quick.

          • 0 avatar
            DukeGanote

            Yep. Taxi drivers, truckers, all the buggy whip manufacturers of the not too distant future. But mercantilism and cronyism is forever.
            http://mobile.nytimes.com/2010/01/10/business/10digi.html?_r=0

        • 0 avatar
          Land Ark

          It’s not a 5 cent fee. It’s a 20 cent fee, the majority going to the state/muni because shut up, that’s why. The 5 cents is just the cab companies’ take of the cut.

          At least it’s fair to everyone, except to Uber and their drivers. Oh, and certainly the passengers when their rate inevitably goes up. But it’s extra fair to the local governments. Especially when they can cut the cab companies out in a few years.

        • 0 avatar
          Kruser

          There has been a lot of horse trading here and Lyft/Uber are quite happy with this deal. Basically, they have a 20 cent fee with 10 going to the town, 5 to the state transportation fund, and 5 to a taxi fund. The taxi companies had a real point in that their drivers and cars were subject to much more stringent and costly regulation. Uber/Lyft had been been threatened with having to go through all of the same inspections, etc and in comparison, this is nothing.
          People can make jokes about “taxachusetts”, but the truth is we are not a state with high overall tax burden. Like many other states, the gas taxes have not kept up with inflation and increasing MPG, so we have been struggling to pay for our crappy roads. The 5 cents given to the taxi companies annoys me, but they, as an industry, are a dead man walking. Everyone knows it and this fee is the equivalent of a last meal… it changes nothing but allows all of the parties involved to feel like they got something in the negotiation.
          Personally, I (and Uber according to the local news) am happy to pay it to keep everyone out of court.

    • 0 avatar
      slavuta

      No this is not stupid. This is called communism.

      • 0 avatar
        mr.cranky

        Say what?

      • 0 avatar
        operagost

        This is not really communism, either. It’s crony capitalism.

        The taxi companies have to pay hundreds of thousands of dollars for medallions when they come up for auction, and the government is propping up that cash cow.

        • 0 avatar
          Kruser

          Hmmmm. Yes and no. It has been pretty hard to avoid this in the local press. The commonwealth set up and nursed the crony capitalism of the medallion system. Everyone could see that Uber and Lyft are destroying their monopolistic system, so this was a way to allow that to happen while limiting the litigation and pain… so as a Boston area resident, I view this as a stupid but necessary way to kill off a govt-provided monopoly. The $10 I’ll pay over the next year will be far less than what I’d be paying for more expensive taxis.
          Now, we just have to put pressure on the airport authority to allow UberX/Lyft to pick up at Logan airport!

          • 0 avatar
            Exfordtech

            Uberx already can pick up at Logan provided they comply with the rules already in place for livery companies. Much of that is fee related for facility and parking maintenance along with security protocols.

        • 0 avatar
          DukeGanote

          So-called “crony capitalism” is “ye olde Mercantilism”, which Adam Smith despised mightily. It’d be communism if taxi drivers were snivel servants instead of a protected class.

  • avatar
    threeer

    Next, we’ll be asked to pay taxes to keep automotive manufacturers in business…oh, wait…

  • avatar
    CoreyDL

    Not sure you’ll make much driving an MKS about for Uber, when you consider fuel expenses. Especially if it’s an EB.

  • avatar
    sirwired

    Before dismissing the idea out-of-hand, you have to consider things like:

    Are Uber, et al, being exempted from regulations that apply to taxicabs, like insurance, licensing, vehicle, or background check requirements?

    Are taxis subject to area-of-service requirements (like NYC’s requirement that any driver take riders to any address within city limits) that Uber is not?

    • 0 avatar
      threeer

      Strictly speaking, no. My wife and I both (just recently) started to drive for Uber. While the company does not insure and license the driver, we are required to be insured and properly licensed. And there is a background check. It may place the burden on us, but we already have insurance and licenses, so it wasn’t as if we were incurring a huge expense upfront to do this. But we sure don’t drive anything fancy like a MKS…lol. She drives a Cruze (albeit at least the 2LT with leather) and I pilot a 2014 Escape.

      Not gonna get rich, but it helps to put a few coins in the bank while my wife takes time away from working full time to pursue her degree (and we have a newly-adopted 10-year old to be home for).

      This type of tax hasn’t (yet) hit us down here in Bama, but I wouldn’t be surprised if it does. Not that it is likely to stop folks (like my 25-year old son) from using it. The cost and convenience for users is a hard deal to beat. But there will always be exceptions when ordering up a taxi makes more sense than trying to get an Uber/Lyft (like early, early morning trips to the airport and such), so there is room for both models, I think.

      • 0 avatar
        Raud Luke

        > While the company does not insure and license the driver, we are required to be insured and properly licensed. And there is a background check. It may place the burden on us, but we already have insurance and licenses, so it wasn’t as if we were incurring a huge expense upfront to do this.

        And that’s the tragedy of it.

        Because most people are not, in fact, properly insured and/or licensed to operate commercial transportation.

        Most US auto insurance policies explicitly void coverage if the insured vehicle/driver are used to operate a “ride sharing” service or other commercial transport. Of course Uber doesn’t really call attention to this fact — it counters the fantasy of making extra cash with things you already have, don’t you know — so people may not find this out until they crash.

        Once you’re involved in a wreck with no insurance, that’s when you’re in for some real fun. And that’s before the lawyers descend upon the scene, mandibles dripping with salivation…

        But there is hope. You could purchase a commercial policy or a rider that covers ride sharing. Sure, it’ll eat into your profits — possibly enough to make Uber less profitable than bagging groceries — but it’s the new sharing economy, man! You can’t expect an employer to provide you with the tools needed for your job now can you?

        • 0 avatar
          dwford

          Uber provides insurance during the ride, but the typical auto policy does not cover ride sharing. GEICO and other insurance companies do offer polices that cover ride sharing.

  • avatar
    yamahog

    Cool. Can I incorporate Yamahog Heavy Industries as a cab company, run no cabs, and get in on this SWEET SUBSIDY ACTION.

    For real though, creative destruction the mechanism that transforms the blood of the workers into lubrication for the gears of capitalist machinery. Without it, we’re doomed and there’s already a terrible scarcity of it. Thank you 0% interest rates, Obamacare that lets the health care industry siphon value from productive elements of the economy, and now Massachusetts for propping up companies that can’t compete.

  • avatar
    ToddAtlasF1

    Maybe if Hillary loses the election we should all be taxed to pay her for lost influence-peddling revenue.

    • 0 avatar
      heavy handle

      She makes a lot more money when she’s out of office, so the money flow goes the other way: if she loses, she’ll pay more taxes. Unless she’s rich enough to benefit from Trump’s billionaire-only tax cuts, of course.

    • 0 avatar
      mr.cranky

      Except she’s not losing.

      Though, Trump could repay everyone that has to listen to his drizzling shit all year long. Knowing him, he will get the payment reduced and ignore it until it goes away (or, until the vulture-lawyers descend).

    • 0 avatar
      ToddAtlasF1

      “The state claims riders won’t see a bump in fees, as the law requires companies to pay the government directly, not through drivers or passengers.”

      Progressive politicians think(know?) progressive voters are imbeciles. Why else would they bother saying that a fee won’t be passed to the users?

  • avatar
    jimbob457

    5 cents per trip to (presumably) cover regulatory costs? Sounds reasonable if everybody has to pay the same.

  • avatar
    SCE to AUX

    “…until the levy disappears in 2026”

    Yeah, right. The closest thing to eternal life on earth is a tax.

    There’s a reason they’re called “Taxachusetts”.

  • avatar
    dwford

    What’s next, a special tax on Redbox to fund dying movie theaters?

    This is the best part:

    “The state claims riders won’t see a bump in fees, as the law requires companies to pay the government directly, not through drivers or passengers. Of course, many feel that the cost will surely be passed down to customers. The taxi subsidy part of the fee runs through 2021, after which the 20-cent levy will be split between the state and municipalities until the levy disappears in 2026.”

    The typical liberal government fantasy of a punitive tax that doesn’t get borne by the consumer in the end, and the fantasy of the expiring tax.

  • avatar

    “The state claims riders won’t see a bump in fees, as the law requires companies to pay the government directly, not through drivers or passengers. ”

    And the companies get their money from…. passengers.

  • avatar
    Bearadise

    If only they had taxed DVD makers and passed that money on to video-cassette makers, we could still buy VHS movies. Just because someone has a better idea doesn’t mean government shouldn’t do all it can to protect the status quo. Sigh.

  • avatar
    Dingleberrypiez_Returns

    I recognize the quality and appeal of their service, but strongly dislike Uber’s business model for a variety of reasons. That being said, I think this is a TERRIBLE idea. Even if it benefits cabbies in the short term, it only legitimizes Uber’s shady existence, and could create a reliance on this revenue stream thereby affecting future regulatory actions.

    Also, “regulate the ride-sharing apps out of business” in Austin? I don’t think so. Uber elected to leave on their own accord. They easily could have complied with the requirements Austin was trying to levy.

  • avatar
    windnsea00

    Merely delaying the inevitable, I have been using Uber (and sometimes Lyft) since 2012 and couldn’t imagine using a traditional cab instead.

  • avatar
    PwrdbyM

    I get tired of taxi companies protesting Uber. The market is speaking in terms of transportation. Maybe if the cab companies provided a better service people would use them. Customers are making the choice but then govt has to step into the mix. I’m pretty sure when I buy a sandwich at Panera I don’t have to contribute a nickel to the struggling McDonalds across the street because they provide a substandard service.

    • 0 avatar
      Big Al From 'Murica

      Pretty sure McDonalds is doing just fine. If anyone needs propping up in that sector at this point it is probably that trendy Chipotle joint on the corner. 1/4 the fat of a Big Mac with twice the EColi as a bonus!

  • avatar
    kosmo

    How many taxes do we need?

    Just one more!

    Uber should deliver this monthly, IN NICKELS!

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