Uber and Lyft are resisting a tax on their services under consideration in the Seattle mayor’s office, claiming the cost would ultimately be passed on to riders and drivers.
Seattle Mayor Jenny Durkan’s team drafted a proposal last August for a new tax on ride-hailing companies, according to public records obtained by The Seattle Times.
Details on the tax are scant but the documents suggest that the funds raised could go toward public transit or affordable housing. Mark Prentice, a spokesperson for the mayor, said they are “exploring a fee or tax to manage the impact of ride-sharing companies on our downtown” but noted, “no decisions – including on specific policy design – have been made.”
Uber spokesperson Nathan Hambley said the company “would be concerned about any proposal that hurts low-income riders and decreases trips for drivers,” in a statement.
Uber’s alternative: Rather than implementing a tax that only hits ride-hailing companies, Uber and Lyft are backing a traffic reduction technique called congestion pricing. It involves using tolls to discourage driving downtown during peak hours. Lyft spokesperson Lauren Alexander called that approach ”a powerful and effective way to reduce congestion in many of our busiest cities” in a statement. She added, “looking at just one type of vehicle, like TNCs, will never truly address congestion.”
Durkan’s office is studying the possibility of using congestion pricing downtown but would need voter approval to do so. If enacted, Seattle would be the first American city to cordon off its downtown using congestion pricing.
Does ride-hailing help or hurt transit? There’s some disagreement over whether Uber and Lyft encourage or discourage public transit ridership in cities across the country. Researchers at U.C. Davis and University of Kentucky published studies that suggest Uber and Lyft dissuade riders from using public transit. Uber disputes those findings, claiming its services increase access to public transit for riders in underserved areas. A University of Toronto study found that Uber increases average transit ridership by about 5 percent after two years.
Big picture: Uber and Lyft already pay fees of 24 cents per trip in Seattle and 33 cents per trip in King County. Durkan’s office is looking at other cities with ride-hailing taxes that are higher, like Chicago and San Francisco, according to the documents. Increasing the cost of doing business in big cities could hurt the companies, which already heavily subsidize rides. In their competition with each other for venture capital and market share, Uber and Lyft are preparing to go public with record losses, according to the Wall Street Journal. Lyft is expected to go public as early as this week.
Editor’s note: This story has been updated with comments from the mayor’s office and Lyft.