Chicago Rejects Uber’s Alternate Tax Proposal

On November 13, Chicago Mayor Lori Lightfoot rejected Uber’s alternate proposal to tax ride-hailing services. The company was accused of attempting to resist regulation.

Uber claimed its plan would raise more money than the city’s plan. Uber’s plan breaks Chicago into tax zones based on availability of other transit options. In other words, if a user could have taken public transportation, a higher tax will be placed than if there were no public transportation options available. 

Mayor Lightfoot proposed to raise “$40 million from a traffic congestion tax on certain ride-hailing trips.” The proposal would tax single-rider trips in the downtown area during peak weekday times. The proposal is one of the latest as American cities propose taxes to fight increased congestion from an increase in ride-hailing use.

Uber rejected the claim, stating its plan would raise money for Chicago in an equitable way by not increasing fees on lower-income communities. Uber and Lyft claimed the mayor’s proposal would hurt low-income communities in Chicago’s South and West sides.

Reuters reported, “Under the mayor’s plan, taxes on single-rider trips would increase to $1.13 from the current 60 cents, while those for shared trips would drop by 7 cents to 53 cents. There would also be a new $1.75 surcharge on weekday rides beginning or ending in a designated downtown area.” The tax is supposed to combat traffic congestion in the city and the city’s budget deficit. Additionally, a downtown rideshare flat fee of $3 from 6 a.m. to 10 p.m.

NBC Chicago reported that “Uber issued a statement Wednesday saying, ‘After months of conversations with the Mayor’s office, we are making public our plan to raise the money the City needs in a way that is more equitable and doesn’t increase fees on South and West side residents by nearly 80%. The Mayor’s statement today is not accurate.’”

“There’s no question whatsoever, when you look at the explosion of new cars that are in the downtown area that’s driven in large part, if not exclusively, by ride share,” Lightfoot said.

A study done by the City of Chicago reported, “during a typical evening rush period, 9,326 drivers complete 29,817 passenger trips. The number of TNP vehicles completing trips during the evening rush equates to 26 miles of road space occupied in the downtown area… by comparison, CTA buses occupy 5 times less road space and can carry 3 times more people in and out of the downtown area during the rush period.” This illustrates the congestion that can be caused by these ride-hailing services.

Other cities, such as New York City and Washington, D.C. already tax rideshare rides. In New York the surcharge goes to the Metropolitan Transportation Authority and the tax is split between the state and the city general fund. In Washington, D.C. 17 percent of the fee goes to the Department of For-Hire Vehicles and 83 percent goes to the Washington Metropolitan Transportation Authority. Chicago could be the latest city to join this trend.