With Massachusetts lawmakers having passed a last-minute bill taxing Uber and other sharing-economy transportation companies to help subsidize taxicab companies, a state government agency is implementing the subsidy process.
In July, hours before formal legislative sessions ended for the year, lawmakers approved House Bill 4570, a bill adding new taxes and restrictions on popular transportation network companies (TNCs), such as Uber.
The bill, signed into law by Gov. Charlie Baker (R) in August, imposes a 20-cent tax on each ride purchased by consumers. The tax funds a state government economic-development agency and provides subsidies to Massachusetts taxicab companies competing with Uber and other TNC companies.
In November, the Massachusetts Department of Public Utilities, whose mission is to “[ensure] that utility consumers are provided with the most reliable service at the lowest possible cost,” will begin drafting rules to govern collection and implementation of the Uber tax.
Taxed Out of Business
Matt Blackbourn, a research associate with the Pioneer Institute for Public Policy Research, says the new tax is “incredibly unusual.”
“It’s incredibly unusual to see a tax on one actor in an industry, the revenues of which go to a competitor,” Blackbourn said. “It’s now a 20-cent levy on each TNC ride through the Department of Public Utilities. Twenty-five percent of that revenue goes to direct financial support of the taxi industry.”
Blackbourn says the new law is already obsolete.
“It’s an archaic regulatory structure that’s based on a time when travel was not as dynamic,” Blackbourn said. “We’re living in a different reality, where people are much more mobile and there’s a demand for that kind of service. You have to ensure that whatever regulations are in place reflect that reality. It’s time for change.”
Robert Krol, a professor of economics at California State University–Northridge, says reducing taxicab regulations would allow taxicab companies to compete with TNCs for consumers’ business.
“Competition, changes in technology … they are disruptive,” Krol said. “That’s how economies grow. That’s what makes people better off. Rather than dump tons of regulations on the rideshare industry, we should try to reduce regulations on taxis.”
Krol says government intervention benefits big businesses instead of consumers.
“With all these cases, and with antitrust cases in general, you don’t see the consumer yelling and screaming for some type of government intervention,” Krol said. “It’s always the competitors who are suddenly faced with increased competition that are the ones complaining.”