Ride-hailing services like Uber, Lyft, and Via are growing rapidly. They are actually two kinds of service: private cars and shared, with shared cars much better for traffic, sustainability, and roadway efficiency. Now, the DC Council has taken a positive step to encourage sharing, relative to riding alone, in the tax code.
DC will be contributing $178 million a year toward Metro's maintenance and repair needs, as part of a $500 million annual regional funding deal. As one part of paying for this bill, the Bowser administration proposed raising the existing 1% tax on ride-hailing services to 4.75%, which would raise about $18 million a year.
Could this tax achieve its fundraising goal and also advance better public policy at the same time? That's a question I posed to regional and national transportation experts, local leaders, and the companies themselves. The consensus: we should encourage more ride-hailing trips to use the “pooled” services, like UberPool or Lyft Line. Via, a third ride-hailing company that operates in DC, uses “pooling” as its primary product offering.
And rather than the usual response to a new tax, where companies try to lobby against it, they joined in a coalition with policy advocacy groups and experts to shape the tax into a different form, which is better for transportation, but which yields the same revenue.
Why pooling is better
Ride-hailing services are an increasingly large part of our transportation mix. They're giving people new and useful transportation choices. According to a summary of research by Bruce Schaller, 8-22% of ride-hailing users wouldn't have made their trip at all without ride-hailing — that means people are able to go places that were too inconvenient before.
They are also contributing to congestion. Schaller found there were twice as many for-hire vehicles (taxis and ride-hailing) in Manhattan's central business district in the evening peak in 2017 than there were in 2013. While private cars still create most of the congestion, new ride-hailing has added to it.
There are a few ways address this congestion. One is congestion pricing, which charges ALL vehicles for using up road space. That's fairest and most efficient, but also politically challenging. A New York panel recommended a congestion charge in Manhattan below 60th Street, but it ran into political obstacles.
Instead, New York is raising money for its subway system by charging a higher tax on ride-hailing. In a first among US cities, it's charging a much higher tax rate for the private rides than pooled ones. It's the same idea as encouraging carpooling among private drivers: two people in a car means half as many cars or twice as much mobility; three people in a car means three times, and so on.
The ride-hailing industry and sustainable transportation organizations agree on this. Uber, Lyft, and Via, along with many local and national policy advocacy organizations like Transportation for America, ITDP, NRDC, and New York's Transportation Alternatives sent a letter to New York Governor Andrew Cuomo in January supporting congestion pricing and policies which favor pooled ride-hailing over single-passenger.
We believe that any serious congestion plan or tax structure should encourage the use of multi-passenger options and discourage the use of vehicles being driven alone or transporting only one passenger. This basic principle is one we believe every city and state should begin to incorporate in its planning. Some companies provide both single passenger options and multi-passenger pooling options. Congestion policy and taxes should clearly incentivize multi-passenger pooling options.
New York City’s streets are a scarce resource. Increasing throughput by increasing vehicle occupancy is a way to satisfy more users’ needs within the same limited road space. Technology is now making the sharing of vehicles increasingly simple, convenient, and cost effective.
There is a long-term bonus the State and City will earn by establishing the sharing of vehicles and congestion pricing as practiced parts of our transportation mix. The eventual widespread adoption of self-driving cars will be well served by these policies and behaviors. Transportation and urban policy experts, including those signing this letter, have pointed out that by using autonomous vehicles on a shared basis we will most effectively reduce congestion, free up parking and lane space for better uses, cut greenhouse gas emissions, and improve livability in our communities. A plan that recognizes the importance of congestion pricing and sharing of vehicles, in combination with robust, effective mass transit, will help prepare New York City for a better future.
The DC Council supports a similar policy
Building on this work, a coalition in DC advocated for a similar policy around the ride-hailing tax. Our testimony, which I wrote as executive director of DC Sustainable Transportation, had support from DCST members like business improvement districts and advocacy groups, as well as Uber, Lyft, and Via, and experts like former DDOT director Gabe Klein and Susan Shaheen of Innovative Mobility Research at UC Berkeley.
The coalition endorsed keeping the tax on pooled ride-hailing at the existing 1% and raising only the tax on non-pooled. Instead of 4.75%, the rate would need to be higher to meet the $18 million revenue goal; the CFO's office, after getting confidential information from the three companies, determined that should be 5.4%.
Jack Evans, chairman of the council's Committee on Finance and Revenue, and his staff put this new provision into the budget, which the committee approved on Tuesday. Robert White (at-large) praised the move, saying:
I was excited to see the investments that were made to further innovate our tax policy here in the District. You [Evans] listened to residents that came to budget hearings and incorporated their feedback in a meaningful way that is in the best interests of our city. For instance, you heard public opinion and concern about the 4.75% tax on all ride share trips like Uber, Lyft, and Via which is needed to fund our metro system and adopted a plan to tax pooled and single rides differently, so that those who opt to take a pooled ride will see no change in their tax rate.
The Bowser administration also said “we are open to” this idea. Kudos to Councilmember Evans and his committee for supporting this change in the budget. Hopefully Chairman Phil Mendelson will leave this provision in the full budget, which will get its first vote May 15
Do these services take riders from transit?
Elissa Silverman (at-large), another member of the committee, disagreed with this change. She said,
I am concerned that exempting the pool options for the higher taxes will cause more harm than good. I understand the ride hailing supporters (who are here in this room) say we should be encouraging pooled rides because they help reduce the number of cars on the road by putting more people in one car. …
[But] I'm concerned the pooled rides are going to actively hurt our public transportation systems. … Metro has said that services like Uber and Lyft are likely taking away riders, and the pooled rides are taking the most away from Metro because they are the most transit-like option.
Studies have supported the idea that ride-hailing may be pulling riders away from transit. According to Schaller's summary, they estimate that 25-57% of people using ride-hailing would have biked, walked, or taken transit. And transit ridership, especially bus ridership, has been declining nationwide with only a few exceptions at the same time ride-hailing has grown.
Silverman's argument is that the pooled rides in particular are competing with transit more than the private rides, and therefore we should not do anything to encourage using pooled rides. I'm not sure that's necessarily true; It's more transit-like, but private riding is more differentiated, such as on convenience. Personal cars compete with transit as well, and lower gas prices have also been a factor in transit's ridership decline.
We unfortunately don't really have the data to answer this question yet, and hopefully can get it in order to more empirically answer this question.
But if our goal is to more efficiently use the road network, move people at low cost, protect the environment, and enable a walkable urban form,
- Transit is superior to
- Pooled rides, which are superior to
- Private ride hails, which are superior to
- Private car travel.
Biking is superior to all of those, when it's a viable option, and walking is even more superior when possible.
Pooling might take people from transit, walking, and biking, but so do private ride hails and so do personal cars. At least a policy which favors the #2 best motorized mode over a worse one is a good step in the right direction. In the bigger picture, we need a policy that discourages both #4 and #3 in favor of #2 and especially #1. That's what the New York letter was suggesting.
As that letter also notes, in the future, we'll have autonomous vehicles, and then there will be a #5: privately-owned AVs driving around empty while their owners run errands. Pitting #1 against #2 pales in comparison to this challenge, and a differential pricing starts to enshrine the basic principle, sharing > single-passenger > empty vehicle into law.
And at some point, pooled rides can be a form of transit. We have “micro-transit,” shared vans that transport groups of people. In developing countries, private jitneys often basically are the transit system. In an autonomous world, there isn't really as much difference between a car, a taxi, and a small bus. Private companies could run bus-sized vehicles and so could transit agencies. The lines all blur, but the key overarching public policy principle is that more people in a vehicle should be encouraged over fewer. What's good about the transit bus isn't that it's public, necessarily, but that it can carry a lot of people.
Future studies might shed some empirical light on these questions. Meanwhile, I support enacting this provision in the budget and making DC a national leader on this issue.