New York, NY – Today the Citizens Budget Commission (CBC) released a policy brief – titled “Taxis, Taxes, and the MTA Funding Gap” – that discusses three alternatives for generating added revenue from services regulated by the Taxi and Limousine Commission (TLC): yellow taxicabs, street-hail livery (“green cabs”), community cars (“livery”), and black cars, which include dispatch service providers (DSPs) such as Uber and Lyft.

Riders now pay a flat 50-cent per-ride tax on yellow and green cab rides and an 8.875 percent sales tax on black car rides, which will generate an estimated $250 million in 2015 for New York State, New York City, and the Metropolitan Transportation Authority (MTA). Added revenue from reforming the taxes paid by riders could be dedicated to the MTA to fill the $2.6 billion gap in its proposed 2015-2019 capital plan.

The CBC presents three options for changing the taxes:

• Expand Coverage of Per-Ride Taxicab Tax. The current 50-cent per-ride taxicab tax is intended to charge riders, who do not necessarily pay other cross-subsidies from vehicle ownership, for the negative externalities of their trips. By this logic, applying the tax to all black car trips, including DSPs, would have raised an additional $33 million in 2015. This amount would grow to between $34 million and $55 million by 2019.
• Increase and Expand Per-Ride Taxicab Tax. When the taxicab tax was instituted in 2011, it represented approximately 4.73 percent of the average taxi fare. After increases in taxicab fares, the figure is 3.95 percent today. If the tax applied to black cars, including DSPs, were set at a rate, rather than an amount (50 cents), then the tax would be 3.95 percent of the fare. With black car fares averaging more than $27, their average tax would be about $1.00 rather than 50 cents. This new tax on black car riders would have generated an additional $70 million in 2015 and between $73 million and $117 million in 2019.
• Transportation Sales Tax Reform. A third option is to lower the burden on black car riders and dedicate the entire tax to the MTA. The new rate could be set sufficient to close the MTA funding gap; a rate of 5.75 percent, assuming that current trends in the industry continue to 2019, would cover debt service on $2.6 billion of borrowing. While this option would require the State and City to forfeit sales tax revenue from this industry, it would fund the shortfall in the MTA’s capital plan and provide a likely growing revenue stream for this purpose from both jurisdictions.

“Cross-subsidies from motor vehicles should increase to pay for the MTA,” said CBC President Carol Kellermann. “Closing the funding gap in the MTA’s next capital plan is vital to the economic prosperity of the region, and rethinking how we regulate the increasingly dynamic services within the purview of the Taxi and Limousine Commission could be part of the solution.”

CBC is a strong proponent of increased reliance on motor vehicle user fees to fund mass transit. CBC’s MTA funding model – known as “50-25-25” – would have fares cover half the costs of mass transit, with general tax subsidies and motor vehicle cross-subsidies each covering about one-quarter. The MTA currently raises only 11 percent of its revenue from vehicle cross-subsidies, including the taxicab and sales taxes, bridge and tunnel tolls, gasoline taxes, and vehicle fees—well below the CBC-recommended benchmark of 25 percent.