Taxing and Regulating the Competition

Here’s a difference between government-run businesses and private businesses: when private businesses face competition, they are forced to innovate to survive. When government-run businesses face competition, they can regulate or tax their competitors out of business.

Blackberry was once the dominant smart phone. Then came the iPhone, which reduced Blackberry subscribers from 85 million to 23 million in just 18 months. In 2016, Blackberry stopped designing phones. But that doesn’t mean it is out of business; instead, it is doing other things like designing driverless-car software.

Now consider the Chicago Transit Authority, which has lost riders in every year since 2012, partly if not mostly because of the growth of Uber and Lyft. Ridesharing has also reduced car rentals (which are taxed by the city) and downtown parking (which is taxes by the city). Although Uber and Lyft also pay taxes to the city, the city estimates it lost a net of $40 million in revenues (including transit fares and vehicle taxes) in 2016. So Chicago Mayor Rahm Emanuel wants to increase taxes on Uber and Lyft to make up the difference.

Meanwhile, in San Francisco, Ford subsidiary Chariot is running buses in competition with publicly subsidized Muni. This has led to demands that the city “regulate Chariot to save public transit.” The term public in public transit doesn’t refer to ownership; it refers to transport that is available to all of the public. So what they really mean is “regulate privately owned transit to save publicly subsidized transit” because, for some reason, subsidized transit deserves to be “saved” from private competition.

The San Francisco Municipal Transportation Agency (MTA) was expected to approve such regulations yesterday. The new regulations forbid private transit operators from competing directly with Muni. The MTA grandfathered in Chariot’s routes, effectively giving Chariot a competitive advantage over other companies that might want to enter San Francisco’s market. But Chariot won’t be able to add new routes that compete directly with other Muni routes.

This is one more reason why government should get out of the transit business. Some of the few private transit operators in the country, such as New York Waterway, succeeded only because they entered a market that the government transit agencies had ignored. Many others, such as jitneys, were regulated out of business. This slows innovation and rewards bureaucratic bloat.


5 thoughts on “Taxing and Regulating the Competition

  1. the highwayman

    Private business will lobby government to prevent competition too. Thus government is anti-rail, roads are not expected to be profitable to survive :$

  2. LazyReader

    Private businesses lobby to government too. Have you ever seen a defense contractor. 7 years behind schedule and 164 billion overbudget the F-35 is the biggest public relations nightmare in history.

    Govt run businesses also have another advantage. When they partake in a massive infrastructure building, they foot the bill to taxpayer, private companies have to spend their own money. We can debate what level of services the govt should or should not provide. thats a issue that’ll be on the debate table for decades to come. But they do provide some services, the question is why do they suck at it in the last few decades? Because they’ve built a legal system of entwined rules that reward sloth and inefficiency. And they’re not incentivized to work hard either. People are civil servants, they get paid at the end of the day whether they do their job well or not. And since their jobs are legally protected or fixed they’re impossible to fire. And if you cant fire them, suspend them, discipline them…..they’ve tuned into the worst bureaucracies. DMV, social security, child services, HUD, transit agencies.

  3. CapitalistRoader

    I was in Chicago a few days ago when Tiny Dancer proposed increasing ride-sharing service taxes and his proposal wasn’t popular. Considering that the Cook County soda tax just got shot down even after Bloomberg spent tens of millions to support it, Chicagoans aren’t in the mood for tax increases.

    Even if the tax increase is successful where the soft drink tax failed, it won’t stop the thousands from fleeing the worsening Chicago and Cook County fiscal incontinency.

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