Ride-Hailing Is Everywhere. State and Local Taxes Are Still Evolving.

More than 15 years after Uber launched, allowing people to hire drivers directly from a phone app, ride-hailing services are now a ubiquitous fixture of big American cities. But the way the services are regulated and taxed continues to evolve.

This month, Philadelphia Mayor Cherelle Parker proposed adding a $1 fee to every Uber and Lyft ride in the city, with the revenue going to help stave off job cuts in the cash-strapped Philadelphia School District. Parker’s office says the additional fee could raise $192 million over five years, and prevent the layoffs of 240 school staff. Initially Parker proposed a 20-cents-per-ride fee in her budget address, but later increased the proposal after learning more about the school district’s budget problems.

“Today, we are putting forward a new, recurring revenue source for the School District of Philadelphia, generated right here in our city,” Parker said in a press release announcing the fee. “We have made real progress in our schools, and I am not going to allow us to lose ground. This is about protecting that progress and making sure every child in Philadelphia has a real shot.”

With affordability leading the political agenda in most places, it’s a tough time to be adding new costs to everyday goods and services. And the fee is far from a done deal. Some City Council members have suggested they’re skeptical of the proposal. And ride-hailing companies are fighting against it.

“The 5x hike of the mayor’s proposed ride-share tax will hurt drivers and hit everyday Philadelphians, making rides less affordable and threatening critical access to jobs, health care, and essential services,” Jazmin Kay, an Uber spokesperson, said in a statement.

By now, Uber and similar services are well-seasoned in lobbying for favorable state and local regulations. Which is not to say they always get their way. Around the country there are at least 51 different state and local taxes on ride-hailing services, according to research published in the journal Transport Policy last year. They raise money for a range of needs, often to cover the cost of regulating the service and to invest in transportation infrastructure, including roads, public transit and mobility services for people with disabilities.

Some states pre-empt local fees and regulations. But ride-hailing companies haven’t taken a hard stance against taxes in all cases. Last year amid a state budget impasse in Pennsylvania, for example, Uber itself suggested the state legislature should expand the sales tax so it would apply to ride-hailing. (Not a pure goodwill gesture: It stipulated that the state should also designate drivers as independent contractors, not employees, a long-standing legal goal for the companies.)

“Providers in general are not as resistant as you might imagine to the idea of being taxed,” says Lewis James Lehe, an assistant professor in the engineering department at University of Illinois Urbana-Champaign and lead author of the Transport Policy study. “One reason is that, to them, the worst thing that can happen is a very strict regulation. A little tax is fine.”

Chicago had one of the earliest local ride-hailing taxes, initially a tax on taxicabs that was expanded to ride-hailing services when they were authorized. The tax has been amended several times over the last few years. Just this year, the city expanded its “congestion zone,” where users pay an extra $1.50 per ride. Other big cities, including New York, San Francisco and Washington, D.C., have excise taxes that apply specifically to ride-hailing services.

Companies have generally preferred statewide policies over a patchwork of local ones. One of the most recent state taxes is in North Carolina, which imposed a 1.5 percent levy on ride-hailing and taxis last summer. The tax came out of a state legislative effort to diversify the sources of revenue for transportation infrastructure.

“The gas tax has been a good friend for a long time, but it’s just not getting it done,” says North Carolina state Sen. Vickie Sawyer, a Republican who chairs the Senate’s transportation committee.

Sawyer says no sooner had she been appointed transportation committee chair than the lobbying began from every direction. Rather than push forward a proposal that would be slowly picked apart in the legislature, she decided to convene industry stakeholders and legislators to develop a package of revenue sources. The organizing principle was, “Everybody needs to get a haircut but nobody needs to be scalped.”

“We got really good policy agreement on some low-hanging fruit that had been shuffled around the General Assembly for years,” Sawyer says.

That included a small tax on ride-hailing, along with an expanded sales tax and other revenue streams. Sawyer says the percentage-based tax was preferable to a per-ride fee because it will prevent the legislature from having to either increase the fee every few years alongside inflation or see the impact of the revenue gradually shrink.

In Philadelphia, Parker has framed the $1-per-ride fee as part of a larger “economic mobility” agenda. Her office cites household survey data showing higher-income people use ride-hailing services more frequently, and would therefore pay more of the burden of the fee. Data also suggests Black people are disproportionately likely to use the services. Kay, the Uber spokesperson, says that more than a million Uber trips last year went to or from a public transit station, and claims that the fee is a “regressive tax that will hurt those who need access to transit most.”

Already the services are taxed at a rate of 1.4 percent in Philadelphia, a tax that’s been in place since Pennsylvania lawmakers first authorized ride-hailing a decade ago. The revenue is split between the Philadelphia Parking Authority, which regulates taxis and ride-hailing in the city, and the schools, which were also facing a budget shortfall around the time the services were being introduced. The schools are anticipating $8.2 million in revenue from existing ride-share taxes this year. District leaders backed the mayor’s proposal, but say in the short term, they’re not holding out for the additional money.