Thursday, February 22, 2018

Nota bene: Taxing Uber is easy

Last week, in my Wired column, I proposed taxing Uber (and Lyft) in an attempt to reduce congestion. The idea in a nutshell, is that they know exactly where the most congested parts of town are, because they can see exactly when their drivers are stuck in traffic. So if you taxed them for every minute their drivers were stuck in traffic, they would have an incentive to route their cars around such areas, and to set their pricing algorithms such that they would have more business in low-congestion areas and less business where there was lots of traffic.

I got quite a lot of pushback to the column, but interestingly all of it came from what you might consider the congestion-pricing lobby. I’ve written about congestion pricing a lot, and I’m fully in favor of it, and the the people who love it tend to love it a lot. All of them had essentially the same criticism: If you only tax Uber and Lyft, and don’t tax private cars, you’re just going to create an incentive to drive into congested areas in a private car, and you won’t reduce congestion nearly as much as you would if you taxed everybody. (For the most lucid and detailed version of this critique, see Charles Komanoff, writing for Streetsblog.)

As far as I can tell, no one attacked my idea from the anti-congestion-pricing side of the argument. No one said “this is a congestion charge and congestion charges are bad”, or complained about Ubers potentially becoming harder to find or more expensive to book, or worried about cities singling out companies like Uber and Lyft with the express purpose of extracting substantial extra tax revenues from them. What’s more, because of the way I structured the tax as being a tax on the companies rather than something directly payable by the drivers, no one complained that it would regressively hurt low-paid Uber drivers.

Which is why I think my idea is something which is eminently politically possible, in contrast to congestion pricing, which has been implemented exactly nowhere in the USA.

Americans love their cars, and they love the freedom that cars represent, and they hate the idea that they should be taxed for driving their cars. Tolls on roads and bridges are bad enough, but a fee just to drive in to a city? That seems to be a political nonstarter in this country. Even New York, the one city where a majority of residents do not own cars, has failed to implement congestion pricing, and it’s far from clear that the latest attempt, from governor Andrew Cuomo, is going to succeed. (It’s opposed by the current mayor, Bill de Blasio, for reasons which seem to boil down to “if Cuomo is for it then I’m against it”.) What’s more, if Cuomo’s idea does succeed, it might well do so by taking my tack, and restricting itself, at least in the first instance, to for-hire vehicles rather than for all cars.

That’s why I love this idea of taxing Uber: It’s something which would create almost zero political opposition, while also getting the congestion-pricing ball rolling. As London and many other cities have found, it’s much easier to expand a congestion-pricing scheme once it has begun than it is to start one in the first place. So let’s start with the low-hanging fruit. It’s easy to tax Uber, and it’s just, too, since Uber causes congestion and since New York City alone accounts for billions of dollars of Uber’s valuation.

Once we start taxing Uber, should we stop there, too? No: by all means, let’s tax all vehicles on congested streets. Tactically, however, this is the perfect place to start.