Seattle Fare Share Plan Taxes Uber and Lyft Riders to Fund City Projects

Seattle raises fees for Uber and Lyft rides with new tax, passes minimum wage for drivers

The referenced article’s title and opening sentence sounds like it is announcing that Seattle just passed legislation defining a 'Fare Share' Plan setting a minimum wage for Seattle drivers

 

“The Seattle City Council unanimously passed legislation Monday that will establish a minimum wage for Uber and Lyft drivers and raise per-ride taxes to pay for city programs.”

 

But sadly, that’s not the way online news article headlines seem to work these days… to have a better understanding of what’s really going on we have to read beyond the headlines.

And understanding what’s really going on is important for active drivers (and people thinking about using rideshare driving as a means to have more income)… if you read only the headlines you will probably believe rideshare driving is not a great way to earn meaningful extra income.

In fact, reading only mainstream media headlines will likely make you believe that “evil” multi-billion dollar rideshare companies like Lyft and Uber are “exploiting drivers” and that most drivers are earning “far less than minimum wage” after accounting for rideshare driving expenses.

 

Seattle Sets Minimum Wage for Rideshare Drivers... Or Does It?

Reading the body of the referenced article tells us that the newly passed legislation in Seattle does not really define a minimum hourly wage for Seattle drivers… at least not yet… and Seattle government officials gave themselves until at least July of 2020 to define what they say will be a new protection for Seattle Lyft and Uber drivers:

 

“Details of the minimum wage for drivers are still being hammered out. The city is commissioning an independent study to determine how to apply minimum wage standards for drivers who are currently categorized as independent contractors and largely responsible for their own expenses. The minimum wage will take effect July 1, 2020.”

 

To understand why I don’t think a government-regulated minimum wage would be good news for rideshare drivers or the rideshare transportation industry check out my blog post Uber Driver Minimum Wage But No Work?

So, if the new Seattle law does not define a minimum wage for drivers then what is the new legislation about anyway?

The answer is easy… the new legislation is about additional tax revenue for Seattle’s government to spend.

 

Understanding why Seattle’s government announces legislation defining new taxes on citizens is easy, government entities don’t earn money… they collect taxes and decide how to spend tax revenue … presenting the new legislation as if it is designed to “help” rideshare drivers… well that’s easy too… right? 

 

“We’re the government and we’re here to help.”

 

This blog explores why in the past few years city and state governments are constantly in the news talking about new or future legislation designed to regulate the rideshare transportation industry. 

Legislation that always sounds like the intent of the new laws are to protect defenseless independent contractor rideshare drivers.

 

Attempts to Regulate the 'Gig Economy' Pick on Uber and Lyft

Uber and Lyft are almost always the primary focus of the regulations; politician’s speeches use Lyft and Uber as examples of the negative impacts of the Gig Economy; and Lyft and Uber are almost always the examples used in seemingly endless negative media reporting.

Think about it… when was the last time (or only time) you’ve seen a news article headline reporting that hundreds of thousands of Americans like you and me are improving their financial lives doing Gig Economy “gigs?”

In fact, it almost always sounds like the proposed regulations are not about the still-to-be-clearly-defined “Gig Economy” as much as they are regulations designed to fix “problems” with the rideshare industry, primarily fixing Uber and Lyft.

Uber and Lyft are most often called out as the companies that need “fixing” or at least in need of new regulations simply because they are the most successful companies in the relatively new, so called: Gig Economy. 

If hundreds of thousands of Americans could earn meaningful extra income (or full-time hours income) walking other people’s dogs… the most successful of the app-based dog walking companies would be in governments “sights” for potential taxing and regulations meant to force the app-based dog walking companies to “behave fairly.”

What I’m saying is Lyft and Uber have not necessarily created problems that need to be solved… they are just the “poster children” of the Gig Economy… again because they are the ones that are most successful… and by “successful” I mean the best opportunity for people like you and me to earn meaningful income.

In another quote from the referenced article Seattle’s mayor sounds like protecting the presumably exploited Seattle-based rideshare drivers is a key goal of the new law:

 

“Seattle Mayor Jenny Durkan introduced the pioneering ‘Fare Share’ program in September as a way to extend the city’s worker protections to gig economy drivers.”

 

There you go… government to the rescue… fear not they are here to protect us from exploitation by evil corporations? 

Let’s look at that quote again:

 

“... extend the city’s worker protections to gig economy drivers…”

 

This politician sound bite certainly sounds like government looking out for the citizens… however, if you read my last blog Average Uber or Lyft Income – What Is It? you will question if the average rideshare driver (working in a medium to large population city) really needs protection in order to earn meaningful income?

Repeating myself from my last blog post… it’s pretty hard to feel sorry for rideshare drivers who in their own words are telling us they are pulling in over $100,000 a year in gross income?

 

Fare Share Plan Raises Taxes on Seattle Uber and Lyft Passengers

So, what does Seattle’s “Fare Share Program” do right now? 

The answer to that question is easy… the legislation defines how Seattle’s citizens will be paying more taxes.

Seattle citizens who use rideshare transportation will be paying more in taxes meaning more revenue for government to spend.

 

“Fare Share introduces a new tax of 51 cents per Uber and Lyft ride to fund affordable housing construction and complete the city’s beleaguered streetcar project. Seattle already charges 24 cents per Uber and Lyft ride to fund wheelchair accessible taxis and cover the costs of regulating the industry. The new tax will bring the total fees to 75 cents per ride. It will apply to all rides that originate within Seattle city limits. Durkan estimates the tax will generate $133 million in new revenue by 2025.”

 

Let’s be very clear, Gig Economy companies Uber and Lyft are not paying any additional taxes… rides will cost passengers more and Uber and Lyft will be collecting these additional taxes from passengers and passing all of the additional funds directly to Seattle’s government for spending.

Some of the plans for the Fare Share Plan funds sound pretty good… affordable housing is always a noble cause given housing expenses are almost always the largest monthly expense for low-income households.

 

The streetcar project is transportation related (so sounds like a reasonable way to spend revenue from taxes on rideshare) and will no doubt help Seattle’s citizens get around… but it appears the funds for this project were supposed to come from other sources of revenue (other taxes on citizens)… not surprisingly the streetcar project is behind schedule and over budget (sounds about normal for a government-led project?):

 

“The city plans to spend $56 million of the new revenue to complete construction of the Center City Connector streetcar, an overdue project costing tens of millions more than initially estimated.”

 

Funding 500 new affordable housing units sounds good, with a projected cost of only $104,000 per new affordable housing unit this project (on the surface at least) sounds like a reasonable expenditure of new tax revenue collected from Seattle’s rideshare passengers:

 

“More than $52 million will be invested in affordable housing projects that the city estimates will produce 500 new homes near transit.”

 

I’m left wondering what is the new Seattle regulation going to do right away that’s meaningful to rideshare drivers?

Maybe the answer to this question is in the following quote:

 

“An additional $17.75 million will be used to create a Driver Resolution Center, an organization that will arbitrate between ride-hailing companies and drivers who have been deactivated from the apps.”

 

$17.75 Million BoonDoggle Driver Resolution Center

Excuse me… how much? 

That’s right $17.75 million to create a “Driver Resolution Center.”

Okay that sounds like it could be meaningful for some drivers… but are we supposed to believe that hundreds or even thousands of Seattle drivers are being unfairly deactivated and that these drivers need a facility and staff to arbitrate their work status with Uber and Lyft? 

In the past Seattle has reported there are approximately 9,000 active Lyft and Uber drivers in the city. 

Let’s be generous and estimate that 10% of Seattle drivers would benefit from the “Driver Resolution Center.”  That means about 900 drivers getting support for disputes with Lyft and Uber at a cost of just under $20,000 per driver.

A facility and staff that will cost $17.75 million dollars just to kick it off and presumably require ongoing funding which will come from the new revenue source being additional taxes on every rideshare trip… taxes which will be paid by the passengers who take the trip?

With apologies for taking an easy shot at Seattle’s government… but let’s hope this city project doesn’t become “beleaguered” like the streetcar project and cost millions more than the $17.75 million allocated in the new legislation? 

 

Okay now, to be fair I can believe there will always be a few drivers unjustly deactivated from the Uber or Lyft driver application, but I find it very hard to believe the city of Seattle needs to spend $17.75 million to create an all-new “Driver Resolution Center” for the purpose of handling deactivation disputes for Seattle rideshare drivers?

It’s just not logical to believe Uber and Lyft are deactivating a lot of drivers for anything but good reason. 

I’m thinking a single new city employee… working somewhere in a Seattle city government office building that already exists… could easily manage the workload of arbitrating between deactivated drivers and Uber and Lyft support?

Heck man, if the Seattle government would let me work remotely from my Denver home, I’d do the job and they could save most of the $17.75 million… or maybe re-allocate the funds and build another 150 or so affordable housing units?

Maybe I’m not “buying” the need for a $17.75 million dollar “Driver Resolution Center” because I’ve always approached rideshare driving in a very professional manner and I have zero fear that I will ever be at risk for being “unfairly” deactivated. 

Doing a “good job” as a Lyft and Uber driver is simply not that hard.

But the primary subject for today’s blog post isn’t about driver deactivations… for more about driver deactivations read the postscript at the end of this blog and my last blog Uber Driver Deactivation Usually Caused by Breaking the Rules

 

Is Fare Share Plan About Rideshare Driver Protection or Revenue Generation?

Seattle’s new legislation known as the “Fare Share Program” has the stated goal of “Extend[ing] the city’s worker protections to gig economy drivers…”

Maybe it’s just me I’m finding it very hard for me to believe the primary goal of these city and state politicians is really to protect rideshare drivers?

In Seattle’s example it appears that creating new revenue was clearly more important than the mayor’s promise to: “Extend the city’s worker protections to gig economy drivers…”

This is certain:

  • Every dollar spent by government comes from citizens by way of taxes
  • Politicians find new ways to generate taxes
  • Politicians determine how tax revenue will be spent with little to no input from the source of the revenue… namely the citizens

 

“The most terrifying words in the English language are: I'm from the government and I'm here to help.” 

~ Ronald Reagan

 

If you’re thinking about giving rideshare driving a try, download a free copy of my Rideshare Driving Case Study to see years of my detailed daily and weekly rideshare driving earnings completing over 14,000 passenger trips in Denver, Colorado. 

In my Rideshare Driving Case Study you’ll see that I consistently earn (on average) over $24 gross income for every hour I spend online completing passenger trips or waiting for my next passenger trip request.

 

POSTSCRIPT – Lyft and Uber Driver Account Deactivations

Since there’s probably no way to stop it from happening… someday Seattle drivers will have a brand new, $17.75 million dollar “Driver Resolution Center” to help arbitrate their deactivation dispute with Uber or Lyft.

I strongly believe that unless it is managed very well the “Driver Resolution Center” will spend a lot of time working with drivers who were deactivated for reasons like multiple reports from passengers of:

  • unsafe driving
  • rude behavior
  • impaired driving
  • sexually inappropriate comments or conversation

I simply cannot believe Lyft, Uber, or any transportation network company (TNC) would deactivate a driver because a single negative report… or even a couple.

  • I suspect most drivers who have been deactivated showed a pattern of behavior over time
  • I suspect most drivers who have been deactivated were contacted by TNC support resources and given the opportunity to improve
  • I suspect every deactivated driver was clearly told why their driver accounts were deactivated

I also suspect Seattle’s “Driver Resolution Center” resources will have to force deactivated rideshare drivers to communicate why Lyft or Uber support told them they were deactivated (if they don’t they will be wasting a lot of time and energy attempting to arbitrate for drivers who were rightfully deactivated.)

As I’ve said it’s just not logical to believe Uber and Lyft are deactivating drivers for anything but good reason.

Consider this: 

  • Until a city mandates a minimum wage (like New York City) there is zero cost for Uber and/or Lyft to have a driver on the road and more drivers means shorter wait times for passengers… shorter wait times is a good thing
  • This means deactivating a driver doesn’t save Uber/Lyft any money and has the potential to negatively-effect customer service…
  • And again, I choose to believe “good reason” means a pattern of behavior by a driver… not just a single report from one passenger.

When writing this blog, I spent a couple of hours reading online reports of drivers reporting they were disconnected from the driver applications… my research including watching a handful of poorly done YouTube videos. 

In these YouTube videos (posted on the public internet) the disconnected drivers used profanity to express their feelings… really not helping their case that they were essentially fired for no good reason?

In the other reports what I read were individual stories from individual drivers… of course they said they did not deserve to be disconnected but what would we expect them to say?  Most did not say what reason(s) Lyft/Uber support resources said they were deactivated.

Some drivers writing online complain about the unfairness of the 5-star rating system… but the reality reported repeatedly online is this: if a passenger bothers to rate their drivers (it’s not required) almost all will rate almost every driver 5-stars. 

Currently I have four 1-star ratings in my last 500 rated Uber trips.

I have no idea why a passenger would give me the lowest rating and no memory of a recent passenger trip that in some way went wrong warranting a low rating… but low ratings from passengers happen. 

My current average (over my past 500 rated Uber trips) is 4.93 so it’s clear to me that the 16 less than 5-star ratings in my last 500 rated trips aren’t doing much to pull my average down. 

While I believe the rating system could be improved, I also believe the system is adequate as a means to help Lyft/Uber support identify potentially “bad” drivers.  A driver receiving statistically more low ratings compared to most drivers is probably doing things a significant number of passengers do not like.

It is popularly believed that an average 4.6-star rating is required to risk being deactivated from the driver application and even then, rather than deactivating a driver it is more likely Uber and Lyft support will contact the driver and work with them to help them improve their future passenger ratings. 

This is exactly what Lyft and Uber say they do; I believe them because it is a logical way to conduct their businesses.

It is without doubt true passengers will sometimes lie about what happened during a rideshare trip, usually the passenger is lying attempting to get a trip for free or at least get some kind of discount. 

It’s also true a passenger who does this often would soon be “found out” because their activity would stand out as “higher than average” in their electronically recorded history with the rideshare application.

If a passenger reports that a driver seemed intoxicated the driver could (for safety reasons) be immediately disconnected on a temporary basis. 

If this is the only report in “a sea” of positive comments and high star ratings every driver reporting online says they were able to be reinstated by contacting and working with Lyft/Uber support.

Again, we need to rely on logical thinking and it’s also not logical to believe that when Uber/Lyft support are considering deactivating a driver that they do not review a driver’s history… and look at a reporting passenger’s history of rating drivers…

That is the thing about The Information Age… there is tons of information stored about all of us and in the unlikely event that a driver’s history is being reviewed for a possible deactivation a passenger who consistently gives drivers low ratings is not going to have the same “pull” as a passenger (that had a problem with the driver) and almost always rates drivers five stars.

In almost four years of following rideshare industry news reports I’ve never seen an article suggesting that a very high percentage of drivers are being deactivated from their driver accounts. 

Sure, I’ve occasionally seen individual drivers saying they were deactivated inappropriately but not only are these stories are few and far between these drivers rarely communicate what they were told by Uber or Lyft support… only saying the driver believes the deactivation was not warranted.

In contrast I’ve constantly seen drivers reporting online that they refuse passenger trip requests because the trip is “too short” or “too long” or “headed to a part of town where I don’t want to go” usually because the trip takes them too far from “the action” not for safety reason because the destination is in a “bad” part of town. 

If Lyft/Uber were my company… there would come a point where I would disconnect a driver who, as example, refused almost every short passenger trip… and I think you would too?

My passengers (I have over 14,000 lifetime trips) have told me stories of drivers who drive aggressively; say blatantly rude or extremely negative things; complain about their life circumstances during the trip; say things my passengers have described as “creepy”; etc.

It is true that Lyft drivers and Uber drivers are independent contractors and have the right to refuse passenger trips for any reason not covered by the legal definition of discrimination.

It is true that as independent contractor-drivers Uber and Lyft have almost zero “right” to control how drivers conduct themselves in the process of completing passenger trips.

It is also true that Lyft drivers and Uber drivers can be deactivated for any reason…

  • drivers choose to sign up…
  • drivers qualify mostly based on having a clean driving record and criminal background…
  • drivers are not promised essentially anything and there are clearly-defined “Community Guidelines” that define basic driver and passenger behavior expectations

Uber Community Guidelines

Lyft Community Guidelines

Drivers aren’t formally hired and they are also not formally fired either… Lyft, Uber, and the other gig economy companies have the right to run their companies… if they believe, based on consistent customer feedback a given driver is not good for business it’s only logical to take action.

 

An Alternative Solution: One New City Employee, No New Office Buildings or Staff

My point is this… I don’t think Seattle needs to spend $17.75 million dollars to create an all new “Driver Resolution Center.” 

I think one person with a simple process (a form to complete) where a driver provides fact-based information why Lyft/Uber told them they were deactivated. 

If that Seattle city employee believed the driver may have been deactivated without sufficient cause… that single employee would contact Lyft/Uber support through an established path for more information… I believe Lyft/Uber would participate and there would be a smooth, cost-effective way to support drivers.

Again, I’m probably biased because I’ve always taken my “job” as a rideshare driver seriously… meaning with my passengers I always act professionally… I have a very hard time believing $17.75 million dollars is required to arbitrate disputes between Seattle’s rideshare drivers and Lyft/Uber support.

The unfolding of Seattle's Fare Share Plan will be interesting to watch. I will be monitoring this situation and, as always, passing on the details that matter.

Seattle raises fees for Uber and Lyft rides with new tax, passes minimum wage for drivers

https://www.geekwire.com/2019/seattle-passes-minimum-wage-uber-lyft-drivers-raising-fees-rides/

Seattle Fare Share Plan Taxes Uber and Lyft Riders to Fund City Projects