On Tuesday, San Francisco voters will go to the polls to decide the fate of Proposition L, which would raise taxes on ridesharing and autonomous vehicles companies for the purpose of tackling an enormous $240 million budget shortfall facing the San Francisco Municipal Transportation Agency (SFMTA). Proposition L would do more harm than good.
Consumers vote at the ballot box once a year but with their dollars every day. Over the last few years, many consumers have opted to begin using new and emerging modes of transportation like ridesharing services over older legacy systems like public bus and train.
Public transit in San Francisco is increasingly becoming inefficient and susceptible to bureaucratic mismanagement, where cheap fares and capital projects are often prioritized over infrastructure maintenance and reliability. Companies like Lyft, Uber, and Waymo offer a competitive alternative to these services, but ballot measures like Proposition L threaten to make choosing that alternative much more expensive for consumers.
Proposition L would impose a tax of up to 4.5 percent on the gross receipts of companies that provide consumers a popular service and then funnel an estimated $25 million in annual revenue to their government operated competitors.
Proposition L rejects consumer spending preferences by explicitly redirecting their dollars to fund the very services they have often rejected in the market. The reality is that $25 million is not nearly enough money to cover the $240 million budget problem that plagues SFMTA—but the tax will send a signal to city government leaders that raising taxes is a viable way to escape their problems.
Companies like Uber and Lyft are successful precisely because they offer people a viable alternative to other forms of transportation, including public transit. Whether due to faster service, convenience, or some other factor, many Americans have determined that using a ride-hailing service is preferable to taking the bus, train, or some other form of transportation. This fact is reflected in robust consumer demand for these services and the failure of public transportation ridership to rebound to pre-pandemic levels.
Proposition L supporters—including a majority of San Francisco’s Board of Supervisors—believe that ridesharing and autonomous vehicle companies will simply pick up the tab—but the economics is not that simple. These companies already compete with one another and public sector competitors, which keeps profit margins notoriously thin. Simply put, rideshare companies may not have the capacity to absorb these fees without compromising service quality or raising prices.
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