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Seattle’s plan to triple the rideshare tax on Uber, Lyft

(Justin Sullivan/Getty Images)

Seattle would have one of the highest taxes on Uber and Lyft in the nation under a proposal from Mayor Jenny Durkan.

The “Fare Share” plan aims to raise new revenue from a source that some say contributes to Seattle’s traffic congestion. Durkan is proposing a plan to impose a 51-cents-per-ride tax on Uber and Lyft; it would be added to the existing 24-cent fee they already pay.

“There’s no doubt that the explosive growth of companies like Lyft and Uber has helped enrich many and has helped create opportunities for communities throughout our region,” Durkan said at a Thursday event officially announcing the plan, which will be part of her budget proposal next week.

“The explosive growth of Uber and Lyft has had a significant impact on Seattle congestion,” she said.

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The mayor’s office says Uber and Lyft had 24 million rides in Seattle last year, half of which either started or ended downtown and those vehicles add to congestion when they are circling or idling downtown, slowing down buses and clogging streets.

Revenue from the new, higher rideshare tax would be used to raise roughly $25 million a year to invest in affordable housing and transit along with new protections for the ride share drivers.

Over its first five years, the ridehsare tax is estimated to bring in $125 million. Out of that revenue:

  • $52 million of that would be used to invest in 500 affordable housing units near transit for people earning between $15 and $25 an hour.
  • $56 million would be used to cover the remaining cost of the Center City Connector streetcar project. After five years, this portion of the money from the rideshare tax would be shifted to pay for other transit, bicycle, pedestrian and safety projects.
  • A little over $17 million would go toward worker protections for drivers, including the creation of a first-in-the-nation Driver Resolution Center run by a non-profit. The program would help companies and workers resolve disputes over things like the sudden deactivation of drivers through an arbitration and appeals process.

The mayor’s proposal also mandates Uber and Lyft drivers earn the city’s minimum wage, $16 dollars an hour, by July 2020 along with compensation for expenses such as gas and vehicle maintenance, and access to benefits such as paid sick leave traditional workers in Seattle get.

Uber and Lyft drivers are independent contractors with a complicated pay system. It currently only allows them to earn when they actually have someone in the car for a ride, not while they’re waiting to find their next passenger or driving to pick someone up. Durkan’s proposal calls for an immediate study to figure out how to take all of that into account to come with the magic number of how much an hour drivers need to earn to get to the equivalent of the minimum wage.

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The study is due by March of next year, with the pay requirement kicking in by July.

Rideshare tax response

Housing advocates praised the proposal.

“Mayor Durkan’s proposed legislation is an opportunity to leverage our city’s growth and ensure essential worker protections while also tackling the two biggest cost burdens for low-wage households: housing and transportation,” said Marty Kooistra, Executive Director, Housing Development Consortium of Seattle-King County.

Transportation advocates also celebrated the plan they say matches Seattle’s growing demands.

“Better transportation, affordable housing near transit, and well-paying jobs – to help everyone access opportunities to live a healthy life. Our actions today will impact the health of our communities and environment for generations,” said Alex Hudson, Executive Director of the Transportation Choices Coalition.

It was less of a celebration for Uber and Lyft which both say they support the minimum earnings part of the plan, but can’t get behind the rest of the plan.

Lyft released this statement:

While Lyft fully supports a minimum earnings guarantee for drivers, the Mayor’s regressive tax proposal for riders will hurt the underserved communities that rely on affordable ride-share most. Fifty-one percent of Seattle Lyft rides start or end in low-income areas, and the Mayor’s regressive tax would increase the fees they already pay by 300 percent, making it the most taxed ride-share city in the country. Drivers will also lose, as their earnings decrease with fewer overall rides. Instead, the Mayor should utilize the surplus the City already has under the current fee structure and combine it with a more equitable and effective approach, comprehensive congestion pricing, in order to fund her larger transportation and affordable housing goals.

Uber provided its own response:

The Mayor’s decision to triple Seattle’s tax on ride-sharing will raise prices for riders and decrease trips for drivers. We support the creation of a guaranteed minimum earnings standard for drivers, and have engaged in good faith with the Mayor’s office and labor leaders for several months on this issue in hopes of reaching a compromise. We believe that any ride-share proposals should be developed based on broad input from the entire ride-share driver community in Seattle.

Some rideshare drivers also took issue.

“I’m extremely disappointed in Mayor Durkan’s tax proposal targeting TNC drivers like me. This tax will negatively impact my earnings with no benefit,” said driver Lynn Reed.

“For the drivers, a tax on rideshare would only reduce the amount of rides and in effect, our earnings,” driver Tony Oh said.

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Michael Wolfe, Executive Director, Drive Forward Seattle, a group of about 2,000 drivers, called it a regressive tax that would lead to fewer rides resulting in a loss of $12 million in earnings in just the first year, he said citing a recent report.

Mayor Durkan disagreed.

“In this growing city of Seattle, a 50-cent tax is not regressive,” Durkan said.

“All economic modeling that I have seen shows it will have absolutely no impact on the number or rides that are taken in this city, and it should have absolutely no impact on the money going in any driver’s pocket. Those companies can absorb that 50 cents, and they should absorb that 50 cents,” she added.

Still, many believe the cost will ultimately be passed along to customers.

“What I say to riders is when you get in that car look in those driver’s eyes and tell them you will treat them fairly, and justly and stand up for them,” Durkan said.

The plan along with the rest of her 2020 budget proposal will have to be approved by the City Council.

Council President Bruce Harrell was on hand for the announcement. He supports it.

“Housing, transit sustainability, a livable city, you know our needs and so this is one of the tools we have,” Harrell said.

“My analysis of it, It is solid … it’s a good plan,” Harrell added before stressing he and the rest of the council would begin the consideration process by listening to those with concerns, including drivers, the companies and labor.

The plan along with the rest of her 2020 budget proposal will have to be approved by the City Council.

New York tacks on a $2.75 fee to Uber and Lyft rides in parts of Manhattan making it the highest tax in the nation, but Lyft says New York doesn’t compare to Seattle or other cities because it’s drivers are regulated like taxis. Chicago is a more comparable city with the next highest tax at 72-cents per ride, which Lyft says would make Seattle’s tax the highest in the nation among comparable cities.

Council President Bruce Harrell was on hand for the announcement. He supports it.

“Housing, transit sustainability, a livable city, you know our needs and so this is one of the tools we have,” Harrell said.

“My analysis of it, it is solid … it’s a good plan,” he added before stressing he and the rest of the council would begin the consideration process by listening to those with concerns, including drivers, the companies and labor Lyft called and asked to me to explain the differences between New York’s plan and Seattle’s.

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