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DC Passes Uber and Lyft Tax to Fund the DC Metro


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6/30/2018
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DC Passes Uber and Lyft Tax to Fund the DC Metro

The D.C. Council unanimously voted Tuesday to impose a 5% tax-hike on ride-hailing services, raising the total rate to 6%.  A tax of $1.20 would be imposed for every $20 ride.

The tax is justified by the same rationale being used in the “head tax” debate in Silicon Valley – that the money is needed to update the failing infrastructure and metro needs – and is being imposed on the “users” of the infrastructure grid who disproportionately contribute to its deterioration.  But, does this rationale hold water?

Certainly, the D.C. Metro and D.C. roads were busy and overtaxed long before Uber and Lyft gained prominence.  Moreover, there is no empirical evidence that the use of Uber and Lyft or other ride-sharing programs has in any way contributed to the deterioration of the road and highway infrastructure of the nation, which has been underfunded and in disrepair for decades.  So, it seems a bit strange to make these new entrants pay for the wear and tear, which they may actually be alleviating rather than adding to.  Why would we de-incentivize innovation and progress?  “Loitering” vehicles cruising while looking for rides to be hailed are inefficient and degrade the traffic infrastructure, increasing wear and tear on roads and highways, whereas Uber and Lyft are more efficient.  Uber and Lyft source cars to locally hailed rides through algorithms, and the result is less time spent “loitering,” “idling,” and “lingering” on roads. 

Successful and innovative business models across the country seem to be a lightning rod these days for state and local taxing measures that often have dubious connection to the parties being asked to bare the weight of the burdens.  Many of the measures are also probably revenue negative and seem designed in ways that seem openly anti-business and likely to decrease rather than increase overall state revenues.

Oregon has a different solution to the transportation and infrastructure conundrum that seems equally bad and just as misguided.  But, the taxes would be convenient and easy for the government to collect.  Taxing workers.  That’s right.  Oregon just passed a measure that will tax “workers” at a rate of one-tenth of 1% of their wages ($1 per $1,000 earned).  The statewide “transit tax” will be administered by the Oregon Department of Revenue.  Receipts from the “transit tax” will go to finance investments in and improvements to public transportation throughout Oregon, except for those involving light rail,” according to Oregon’s Department of Revenue. The tax is taken directly from payroll withholding and will not even be noticed by many, when it goes into effect Sunday, July 1st.  However, this is “tax creep” and once new taxes can be quietly added to existing ones and lumped into the amorphous and little understood state and local payroll withholding, we have descended onto a slippery slope that trends downward.  Whatever else may be true, measures like this one will decrease the buying power of workers and reduce private economic activity in the state, reapportioning resources earned through profitable labor to state run public projects supervised by unaccountable government agencies.

As with other taxes on “employers,” “jobs,” and “workers” those who are putting their capital, labor and skill to work for society are being robbed of their contribution to value, having that value re-distributed instead to projects and programs that have no demonstrable “value-add” and which have been approved by politicians and cronies through state and local budget battles and doled out to cronies or benefactors.  This is the opposite of a free market where consumers “vote with their feet” and make “buying decisions” based on value.  

Substituting political wisdom and cronyism for the invisible hand of free markets is anti-capitalist and moves the needle along the continuum in the direction of communism or socialism.  Perhaps, this is the point.  But, if it is, we should be open about it and state emphatically that we do not have a free market, and we are abandoning capitalism in favor of another model.  Politicians should not champion measures under the auspices that they are taxing a particular activity at rates commensurate with their “use” of the system – requirements taxes on system use – and admit that they are looking to openly redistribute profits from any source they can reach – particularly new entrants who are easy targets because they lack the political capital and entrenched alliances to nimbly defend these unjustified attacks. 

https://www.nbcwashington.com/news/local/DC-Council-Approves-Tax-Hike-on-Uber-Lyft-Rides-to-Fund-Metro-486602821.html

http://www.ktvz.com/news/new-oregon-transit-withholding-tax-starts-sunday/759131241

http://www.registerguard.com/news/20180626/oregon-workers-to-start-paying-transit-tax



Category: Tax Law


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