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Could Uber and Lyft survive if the state levies higher fees on the rides they provide?

Massachusetts lawmakers are considering higher fees for Uber and Lyft rides.David Paul Morris/Bloomberg

Can Uber and Lyft sustain $50 million or more in new annual fees paid to the Massachusetts government?

The ride-hail companies today pay 20 cents for every trip in the state but would see a considerable hike under a bill before the House of Representatives that also includes a 5-cent gas tax increase. The proposal would keep the 20-cent fee in place for shared trips, such as UberPool, but increase the rate to $1.20 for solo trips and to $2.20 for services like Uber Black, which connects riders with luxury vehicles.

The revenue would help fund the MBTA, the regional bus systems outside of Greater Boston, and the cities and towns where ride-hail companies operate.


Unlike in most jurisdictions with ride-hail fees, however, the companies would not be allowed to pass the cost on to riders or drivers. That means two companies that still are not profitable would be forced to add tens of millions of dollars to their costs.

“For them to absorb an incremental $50 million or $100 million of expenses, that’s significant, relative to the overall pie,” said Daniel Ives, who analyzes ride-hail companies for California-based Wedbush Securities. “For a company that’s trying to get to profitability . . . that would be a tough pill to swallow.”

It’s unlikely the companies would simply absorb the costs, Ives added; even if they can’t directly pass them on to customers, they’d probably boost base fares or find some other way to offset the new costs. But if regulators deem that kind of maneuver off-limits, “it would be an onerous variable they’d have to contend with,” he said.

Indeed, Uber and Lyft have suggested that riders would see higher overall costs if the bill becomes law, even if they aren’t directly required to pay the fees. Lyft recently sent an e-mail to users saying the proposed increase “could make it more expensive for you to get around.” And Uber accused lawmakers of raising costs for riders “secretly,” indicating customers would ultimately pay more as a result.


But Uber also said it would be less opposed to the House proposal if riders were paying — not just for financial reasons, but for policy reasons.

In cities like Chicago, officials have established higher ride-hail fees for solo trips, compared to for shared rides, which carry multiple riders on similar routes as a way to encourage more people to travel in fewer vehicles. (Chicago also charges higher fees in a central downtown area where public transit is plentiful.) While Uber fought the Chicago proposal, it did suggest alternatives that still endorsed the idea of charging more for solo trips and less for UberPool.

But that type of incentive works only if the customer feels the impact of that higher fee, Uber said.

“We are often supportive of fees that are designed to encourage people to share their rides or take mass transit — when and where it’s available," said spokeswoman Alix Anfang. "However, it is hard to change rider behavior if we are not able to pass on a financial incentive.”

The Greater Boston Chamber of Commerce has also called on state lawmakers to allow the companies to pass the cost on to riders to influence behavior. Even if the fee results in higher hidden costs, riders will respond only if it’s made clear they’re paying more for solo trips, said Ben Stuart, the chamber’s director of research.


“You’re not going to be like, ‘Oh it looks like my Uber may be $1 more expensive than it used to be,’ " Stuart said at a panel event last week. "You need to be told, and see it in a transparent manner.”

But lawmakers say they are trying a different approach: incentivizing the companies, not the customers, to generate more shared trips.

“It will be on the companies to come up with some incentives for how they’d pursue their customers,” said Aaron Michlewitz, chairman of the House Ways and Means Committee, who sparred with Uber while leading negotiations before passage of the 2016 state law that mandated background checks for ride-hail drivers. "We wanted to hold our constituents harmless, but we also wanted to incentivize the companies to be innovative.”

Representative William Straus, the House’s transportation chair, suggested ride-hail companies could find ways to better market shared trips or develop other types of incentives for riders or drivers to boost shared trips.

Shared trips are already cheaper than solo rides in the Uber and Lyft app, and the companies have both said they hope to see large increases in those types of rides.

Yet Lyft recently offered some Boston riders 10 percent off the price of all types of trips — except shared rides.

Lawmakers on Monday filed several amendments that could adjust the size of the fees before an expected floor debate on Wednesday, but none that would allow the companies to pass the fee on to riders. In separate legislation, Governor Charlie Baker has proposed a fee increase to $1, with no differential for shared trips. His bill would also bar the companies from passing on the costs.


The House bill would also require much more detailed data collection on Uber and Lyft trips, which could help municipalities learn where and when ride-hailing is happening most frequently.