There have been several attempts to regulate the sharing economy over the last few years, but Republican Governor of Massachusetts Charles Baker recently signed a new regulation into law that is by far the most egregious display of corporate welfare.
Forced to Fund Competitors
In a completely unprecedented move, Massachusetts will become the first state in the country to levy a five cent-per-ride tax on ridesharing platforms, like Lyft and Uber. Though this tax alone would be enough to anger free-market advocates, the new regulation doesn’t just stop at the nickel fee.
The money that is collected from this new tax will go towards subsidizing the traditional taxi companies that operate within Massachusetts. As can be expected, ride services companies are not pleased by this new regulation that essentially forces them to help fund their competition.
This new tax will be used to help cab companies achieve what ridesharing services have been able to do without any access to subsidies.
Kirill Evdakov, Chief Executive of the Boston-based ridesharing service Fasten, commented on this matter, saying, "I don't think we should be in the business of subsidizing potential competitors.” Kirill is absolutely right: forcing ridesharing services to subsidize the taxi industry, which has been trying to regulate businesses like Fasten into nonexistence, is not only unheard of, but completely ridiculous.
Imagine levying a tax on Target every time someone chose to shop at their establishment, and then giving that tax money directly to Walmart. This type of regulation is essentially punishing ridesharing services for being successful.
This new law is justified by saying the revenue will go towards helping the traditional cab companies create "new technologies and advanced service, safety and operational capabilities.” In other words, this new tax will be used to help cab companies achieve what ridesharing services have been able to do without any access to subsidies.
Though only five cents per ride will be going to the traditional taxi industry, the new law will actually place a 20 cent tax on ridesharing companies overall. The remaining 15 cents will be divided, with 10 cents going to the city where the service is operating, and the other five cents going towards a “state transportation fund.”
Instead of being praised for their success, ridesharing services are being punished while taxi industries are being rewarded for failing to innovate.
While subsidizing the taxi industry is easily the worse aspect of these new regulations, giving a portion of this new tax to the cities is going to make it harder to repeal or reform these types of regulations later, after local governments become accustomed to receiving this money.
In Massachusetts, ridesharing companies are responsible for 2.5 million rides per month. Those benefiting from this new tax stand to make millions of dollars from this regulation, something Massachusetts city governments are sure to be happy about receiving.
The government should never be responsible for picking losers and winners. The taxi industry has failed to evolve and innovate over the years, which has allowed ridesharing services to fill a void in the market. Instead of being praised for their success, ridesharing services are being punished while taxi industries are being rewarded for failing to innovate.
This article was first published by Generation Opportunity.