Should Uber and Lyft pay to improve taxi industry? The Bay State says yes

As part of a law passed earlier this month solidifying regulations of the ride-hailing industry, Massachusetts now requires companies to contribute 5 cents of every trip to a new fund that will help modernize the taxi industry.

Massachusetts appears to be the first state to divert some of the new taxes it has imposed on ride-hailing companies, including Uber and Lyft, to help fix the declining taxi and livery industry.

As part of a law passed earlier this month solidifying regulations of the ride-hailing app companies, the state now requires them to contribute 5 cents of every trip to a new fund that will help taxi businesses adopt "new technologies and advanced service, safety and operational capabilities and support workforce development,” according to the law. The taxi-support fee is one piece of an overall 20 cents-per-trip tax. Besides the 5 cents taxi fee, 10 cents will go to Massachusetts cities and towns, and the remaining 5 cents will be routed to a state transportation fund. The taxi-support fee will last through the end of 2021.

The amount to be collected overall could amount to about $15 million, The Boston Globe estimates. This is based on the 2.5 million rides a month that Uber and Lyft report in Massachusetts, and an estimated 100,000 rides a month for Boston-based Fasten, which hasn’t released its ridership numbers, plus a 25 percent annual growth rate for all three services.

“Could a similar subsidy have saved cinema organists, minicomputers, or the Pony Express?” writes the Globe’s Scott Kirsner in a column last week.

There is not yet a plan for how the money will be spent, says Mark Sternman, a spokesman for MassDevelopment, the state agency that which will be in charge of the money, as Reuters reports. A small review board is scheduled to get together once a quarter to select ideas that are worthy of funding.

Some of these could include taxi fleet upgrades to hybrid or electric cars, and additional taxi stands in prominent city locations. “This will reduce wait time and guarantee immediate service,” says Eran Ben-Joseph, head of the urban studies department at the Massachusetts Institute of Technology, in an email to The Christian Science Monitor. He also recommends that the money go toward improving the state’s ailing public transit system, biking and walking infrastructure, and the development of autonomous taxis.

Uber and Lyft haven't chimed in on the fee, though Fasten’s chief operating officer Vlad Christoff has characterized the new tax as a subsidy of the competition, according to the Globe. Generally, the ride-hailing companies have praised the new regulations, which were signed into law on Aug. 5 by Gov. Charlie Baker. They proposed legislation was contentiously debated in the state, and ultimately came out less strict than the rules imposed on taxi drivers, according to MassLive. 

Some taxi-business owners say the new rules for ride-hailing drivers, which require background checks, inspections, and insurance, aren’t strict enough. And the new nickel fee, some say, won’t be very helpful.

"They've been breaking the laws that are on the books, that we've been following for many years," Larry Meister, manager of the Boston area's Independent Taxi Operator's Association, told Reuters.

Ride-hailing companies, which allow people to easily and quickly order rides from independent contractors through phone apps, have attracted the ire of taxi companies globally, whose business they’ve siphoned and whose rules they've skirted because these tech companies have proven hard for regulators to define. In 2013, California was the first to create a new category –  “transportation network companies” –  and new rules for these services, which have resisted being classified as taxis. Today, about 20 other US states have imposed rules on the companies.

Some cities and states have banned the service. According to an Uber blog that lists the legal status of the service in various part of the world:

Some regions have banned the service completely – declaring it wholly illegal under state or federal law. Other regions – such as Germany and France – currently block lower-end rideshare services (like UberPOP), but allow higher-end options (like UberBLACK and UberLUX). The company’s legality is sometimes even challenged on a micro level, in local municipalities – such as small communities like East Hampton, NY or Panama City Beach, Florida – which have declared the service illegal.