When Seattle Mayor Jenny Durkan signed new taxes and regulations on Uber and Lyft into law Tuesday afternoon, the city became the latest in a series of local and state governments going to bat against the tech giants.
It was once Uber and Lyft that steamrolled cities on their path to market dominance, but today the roles are reversed. As evidence mounts that Uber and Lyft contribute to congestion, and drivers become emblematic of income inequality, cities are the ones playing hardball with ride-hailing companies.
The legislation Seattle approved this week increases taxes on Uber and Lyft from 24 cents to 75 cents per ride. Durkan’s “Fare Share” plan also establishes a minimum wage for drivers in line with Seattle’s $16 hourly standard but the city has not yet hammered out how it will work in practice. Seattle is commissioning a study to determine the appropriate rate, taking into account factors like driver idling time and expenses.
Previously: Seattle raises fees for Uber and Lyft rides with new tax, passes minimum wage for drivers
Fare Share resembles regulations New York has adopted over the past year in some ways. In January the city added a $2.75 congestion charge for Uber and Lyft rides ending or beginning in Manhattan. New York then added a minimum wage of about $17 per hour for drivers. The city has also indefinitely frozen new licenses for would-be Uber and Lyft drivers.
New York’s tough rules could have an outsized impact on Uber and Lyft at a critical time for their businesses. They make it expensive and difficult for the companies to operate in one of the biggest ride-hailing markets in the world. The crackdown comes as newly-public Uber and Lyft try to assuage investor concerns about regulatory interference and the ride-hailing industry’s underlying economics. Both companies are unprofitable and have seen stock prices drop this year.
Uber and Lyft responded to New York’s sweeping regulations by raising prices across the city and filing legal challenges. The companies are also limiting access to their apps in New York City, locking drivers out during periods of low demand. Uber says the regulations have “disproportionately impacted price-sensitive riders in lower-income communities.”
As they did in New York, Uber and Lyft will pass the increased taxes on to riders in Seattle. That means Uber customers who take trips that start in Seattle will pay an additional 51 cents per ride. Seattle plans to use the revenue raised by the new tax to fund affordable housing and transportation projects.
Uber and Lyft have said they are generally supportive of a minimum wage for drivers but they oppose the increased taxes in Seattle. It remains to be seen what action either company will take in response to the new regulations approved this week.
Though New York has been the most aggressive regulator of the ride-hailing industry, it’s in good company. California state lawmakers approved a bill in September that makes it harder for companies like Uber and Lyft to classify their workers as independent contractors. The companies are fighting the legislation through legal challenges and a proposed ballot initiative. Uber argues that drivers aren’t core to its business.
New Jersey slapped Uber with a $649 million fine for back taxes earlier this month, claiming that by miscategorizing drivers, the company had skirted employment taxes for years. And London officials decided not to renew Uber’s operating license in the city this week, citing ongoing safety issues.
A recent report from NYU’s Rudin Center for Transportation compared Uber rules in 13 international cities, highlighting the shift to a more heavily regulated environment. The study revealed cities around the world are regulating Uber and Lyft more aggressively than ever before, setting new rules to curb congestion, reduce pollution, raise revenue, and expand worker protections to drivers.
“Though many cities were unprepared for the influx of cars and traffic created by the emerging e-hail service markets between 2012 and 2014, they are now well aware and poised to tackle them,” the report says. “From obtaining and managing trip data, to balancing the public’s desire for easy access and drivers’ need to earn a living, to the increasingly unmanageable congestion, cities — through collaboration and a collective understanding — can enact smart regulation to improve mobility for all.”