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.
Instead, they will look to pass on these new costs to customers. Lyft notes that rideshare customers already contribute $20-30 million per year in ride fees to fund public transit, bike, and pedestrian services. Even supporters acknowledge the tax could add the equivalent of 90 cents to a $20 fare. In a city that is already one of the nation’s most expensive, higher rideshare prices will only make life more unaffordable.
San Francisco should have learned its lesson when voters approved Proposition D in 2019, which imposed a 1.5 to 3.25 percent tax on ride-hailing businesses. The city then used this tax revenue to pay for municipal services and for various road projects. However, even with this extra influx of money, SFMTA still managed to find itself in a financial hole.
Now, Proposition L advocates want even more taxpayer money. This time to exclusively fund public transit. But the reality is that Proposition L is a poor strategy for long-term financial sustainability, and it risks creating a perverse incentive for the city to raise taxes and spend even more recklessly.
Proposition L is bandage for a problem the requires a tourniquet. It will not address the city’s long-term spending problem, nor will it patch the budget hole in any sustainable way. Instead, it will make life more expensive and difficult for many consumers that have rejected public transit in San Francisco in favor of rideshare and autonomous vehicle alternatives.
If cities are serious about improving their public transportation service offerings, they must first grapple with the reasons for the budget shortfall: mismanagement, inefficiency, and changing consumer wants and needs. Only then can public transit successfully compete with emerging modes of transportation.
