Massachusetts Is Taxing Rideshares to Fund Taxis

Also: Lyft’s trying to sell the company, but nobody’s buying.

Photo credit: Emmanuel Huybrechts, CC BY 2.0.

So last week we learned that Uber is bringing self-driving cars (which I will continue to refer to as “robot cars,” because ROBOT CARS) to Pittsburgh and, eventually, the world:

This week, Massachusetts decided to add a 5-cent rideshare tax to every Uber and Lyft ride and use that money to bolster the non-robot-car taxi industry:

Massachusetts is preparing to levy a 5-cent fee per trip on ride-hailing apps such as Uber and Lyft and spend the money on the traditional taxi industry, a subsidy that appears to be the first of its kind in the United States.

I’m not much of a gambler, but I feel like the state of Massachusetts is putting its money on the wrong horse. The only worse bet would be the one where we stop using cars and go back to horses.

The total per-trip fee is actually 20 cents; 5 cents will go to taxis, 10 cents to “cities and towns” (whatever that means) and 5 cents to a Massachusetts state transportation fund. The rideshare companies are required to pay the fees, not the individual passengers:

The tax won’t be a piecemeal addition to the ride’s total bill, as a law currently stifles that practice. The companies will have to pay the fee directly to the state, which means the general cost of ridesharing is likely to rise to cover that fee. Neither Uber nor Lyft immediately responded to a request for comment.

I hope Uber and Lyft weren’t available to comment because they were busy either making robot cars or selling themselves to the highest bidder, respectively:

The company, which is based in San Francisco, has in recent months held talks or made approaches to sell itself to companies including General Motors, Apple, Google, Amazon, Uber and Didi Chuxing, according to a dozen people who spoke on the condition of anonymity because the discussions were private. One person said it was Lyft who was approached by interested parties.

My first thought, of course, was “why wouldn’t Google or Amazon want to buy Lyft?” (Imagine if Amazon Prime came with a free Amazon Lyft ride every month.) The NYT gives us one big reason:

Lyft also struggled to find a buyer because of the challenging economics of the ride-hailing business. Companies like Lyft and Uber typically take 20 percent to 25 percent of the cost of each ride. With Lyft drivers expected to pick up an estimated $2 billion or so in fares this year, that meant Lyft’s annual revenue would be about $400 million, according to a person familiar with the company’s financials.
That $400 million shrinks after marketing costs are factored in. To win loyalty from drivers who can also work for Uber, Lyft also sometimes lets drivers keep that 20 percent to 25 percent of some rides, so the company effectively earns no revenue in those situations. And in some cases, Lyft provides drivers with additional cash incentives simply to get out on the road, adding to its costs.

I’ve heard more than one Lyft driver speak very positively about the “if we make enough trips in a week, we can earn back the money that Lyft usually takes out” factor. This is the kind of perk that I hope won’t disappear, after Lyft inevitably sells to somebody—but that hope isn’t particularly high.

I also have to tell you how I learned this news item, because it’s hilariously apropos: I was in a Lyft car this weekend and the driver asked if I had heard that Lyft was trying to sell the company. When I said I had not, he explained the situation and then told me he had learned it when he picked up a passenger who asked “have you heard that Lyft is trying to sell the company?”

The human gossip mill is just as powerful as the internet gossip mill, which I absolutely love.

But I’m still putting my money on robot cars.