OP-ED CONTRIBUTOR

If You Can’t Beat Them, Tax Them: Why Boston Cronyism Won’t Save Cabbies

Taxi drivers have a special way of dealing with Uber in Kenya, Malaysia, Mexico and some developed countries, such as France and Belgium. They ambush contract workers who use the ride-hailing app and assault them.

One Uber driver in Costa Rica had his car smashed with a baseball bat. Protesters in my native India threw rocks at Uber vehicles in June. Sticks and stones deliver a stern warning, but taxi lobbyists in the United States prefer a different weapon to ward off anyone threatening the old guard: government force.

New York Mayor Bill de Blasio tried to cap the number of Uber drivers allowed in his city, while police in Columbia, Mo., launched a 2015 “sting” ticketing Uber drivers caught within the jurisdiction. That’s nothing compared to Finland, where Uber drivers have faced criminal prosecution.

The latest shakedown comes in Massachusetts, where lawmakers have imposed a tax on every trip brokered through Uber, Lyft and similar services. The tax includes 5 cents per ride that will go directly to the taxi industry to support “technologies and advanced service, safety and operational capabilities.”

In other words we’ll never know what happens to the money, which is expected to be millions of dollars per year. It certainly won’t reach the drivers themselves. That’s not how cronyism works.

Poor people lack access to backroom deals, where loot gets divided, so they rarely come out ahead when regulators give up the pretense of neutrality. What happens instead is pure redistribution of wealth from the have-nots to the haves.

As Bloomberg columnist Megan McArdle writes, “This is a shamelessly unjustifiable giveaway to a special interest, paid for by taxing a competitor.”

The taxi industry can’t beat Uber in terms of value creation. But instead of joining them, as the maxim goes, the strategy has been to tax, sue and regulate them to “level the playing field.”

Around the turn of the previous century, this would be akin to taking money from automakers to subsidize the horse and buggy industry — something much different than using public funds to build bridges and roads for everyone.

Creative destruction caused by innovation can be painful for the companies left behind. But this is what drives upward mobility for the masses, including the Uber driver I met during a recent New York City trip.

He had struggled with his rigid schedule as a taxi driver and hated the taxi medallion owners for taking advantage of him. So he switched to the smartphone model. Now he chooses when he works and has a car that he can use for family purposes during off hours. Creative destruction has made his life better, not worse.

The impact is even more obvious when comparisons are stretched over time. Average Americans today have access to better health care, transportation and telecommunications than the richest people of previous generations.

Just within the past 30 years, the United Nations estimates that more than one billion people have climbed out of poverty as China, India and other countries move toward economies that let market forces — not cronies — pick winners and losers.

Does the United States really want to move in the opposite direction by propping up industries that let technology pass them by? Ten thousand years of history shows why this would be a mistake.

 

Rajshree Agarwal is the director of the Ed Snider Center for Enterprise and Markets at the University of Maryland’s Robert H. Smith School of Business and a Cato adjunct scholar.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Submission guidelines can be found here.

Briefings

Tech Brief: NTSB Plans Vote on Cause of Tesla Autopilot Accident

The U.S. National Transportation Safety Board plans to vote at a hearing next month on the probable cause of a May 2016 car crash that killed a man who was using the semi-autonomous driving system in his Tesla Model S sedan. The incident raised questions about the safety of semi-autonomous vehicle systems that allow car operators to drive for long stretches with little human-vehicle intervention.

Tech Brief: Lobbying Tech Groups Target NAFTA Renegotiations

According to data from the Center for Responsive Politics, the number of tech companies and trade associations registered to lobby U.S., Canadian and Mexican government officials has more than doubled in the last few months. Companies like Cisco Systems Inc. and Microsoft Corp. are looking to zero out tariffs for tech goods and remove restrictions on cloud storage as officials prepare to renegotiate the North American Free Trade Agreement.

Tech Brief: Intel CEO Leaves Trump’s Manufacturing Council

Brian Krzanich, Intel Corp.’s chief executive, joined the chief executives of Merck and Under Armour in announcing that he would leave Trump’s council on American manufacturing following the president’s response to violence during a white supremacist rally in Charlottesville, Va. Krzanich said he resigned “to call attention to the serious harm our divided political climate is causing to critical issues.” 

Tech Brief: Week in Review & What’s Ahead

The U.S. Court of Appeals for the 8th Circuit will not block the Federal Communications Commission’s April decision to eliminate price caps for much of the business broadband market. The FCC’s business data services ruling deems certain local markets as competitive, even when there is only one broadband service provider.

Tech Brief: Benchmark Capital Sues Former Uber CEO Kalanick

Benchmark Capital is suing Uber Technologies Inc.’s co-founder and former CEO Travis Kalanick for not honoring the terms of his resignation and allegedly trying to stack the company’s board with allies to prepare for a return as CEO. The Silicon Valley venture firm, one of Uber’s biggest shareholders, alleges that Kalanick is attempting to “entrench himself for his own selfish ends” — an accusation a Kalanick spokesman called “without merit.”

Load More