Economic Opportunity

A Rigged Competition: Ride-Hailing vs. Car-Sharing

July 26, 2016

Luddites and taxicab protectionists alike lament the fact that ride-hailing services like Uber and Lyft face lower taxes and fewer regulatory burdens. However, such complaints cannot be levied against car-sharing firms like Zipcar and Car2Go.

As Josh Zumbrun reports for The Wall Street Journal, “Local governments around the country are tipping the scales and helping to shape the industry’s winners and losers” by increasing taxes “on the car-sharing industry but not ride-hailing.”

Unfortunately for the car-sharing industry, it entered into an already heavily-taxed sector of the economy: rental cars. As Zumbrun explains, rental cars’ “taxes often are intended to extract revenue from business travelers, although in practice many are applied on a per-transaction basis.” For example, Zumbrun writes that “A business traveler might barley notice a $4 tax on a $100 car rental for a multiday trip. Someone paying $4 in tax on an $8 one-hour rental, however, is far more likely to take notice.”

However, as a new Mercatus Center report argues, the comparable absence of government meddling in the new ride-hailing industry versus the traditional taxicab industry is not an argument for intervention but rather one for de-regulating the transportation industry, including taxis and—in this case—the rental industry as well.