Deregulate the taxis

The taxi industry in the United States used to epitomize the spirit of can-do entrepreneurship. In the 1920s, an immigrant could arrive in New York City with nothing, save up or borrow money to purchase a car, paint the word “taxi” on it and jump right into doing business. The driver could work their own hours and set their own rates. It was a free market that measured success according to work ethic.

The industry started to go downhill in 1937. That was the year that government stepped in. New York started to require taxis to purchase special permits, called medallions, and set limits on the quantity available for sale. This artificial scarcity inflated the price of medallions to a record $1.3 million each in 2014. Only large taxi companies could afford such prices, so most drivers had to trade away their entrepreneurialism in order to become employees. The only alternative was condemning oneself to debt slavery when they try to finance a medallion on their own.

The over-regulation of taxis affects transportation in Anchorage as well. Municipal law enforces a cap on fares, limits permits pursuant to when and where taxis can operate and determines the approved circumstances in which a driver may refuse service. There is an expensive index of permit fees and requirements like equipment, drug testing and vehicle inspections. Some of these regulations are draconian. Others are redundant since state law already regulates car insurance and driving under the influence.

Most importantly, however, these regulations put taxi drivers at a significant disadvantage compared to ride-hailing companies like Uber and Lyft. Ride-hailing companies were approved to do business in Alaska only a few years ago, and they have not been subjected to the same onerous regulations as taxis. Despite that, their quality of service has been excellent. This strongly suggests that the government’s involvement in the vehicle-for-hire industry does not produce superior results.

The over-regulated taxi industry is unable to innovate in this evolving economy. Ride-hailing companies have tapped into customer needs that the taxis failed to identify, such as requesting rides via an app or enjoying a customized vehicle. Even the reviews are reciprocal since both passengers and drivers can rate each other on behavior.

It is very likely that the taxi industry will continue losing customers and laying off drivers. This is natural for sectors that fail to compete, but we should sympathize. Taxi drivers are our fellow Alaskans. Instead of trying to penalize the creative competition, as some wish to do, we should give taxis the freedom to innovate. Deregulation is the only way to save their jobs.

A new ordinance proposed in the Anchorage Assembly is attempting to do exactly that. Assembly Chair Eric Croft’s ordinance would repeal the burdensome municipal regulations that taxis must adhere to. To create a level playing field, they would still be subject to state laws governing vehicular operation, just as ride-hailing companies are. This would not penalize one side or the other, but give every competitor the freedom to succeed or fail according to their own work ethic and creativity.

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Some things need to be cleared up when we discuss adopting Croft’s ordinance. This should go without saying, but municipal deregulation here does not transform local transportation into a Mad Max free-for-all apocalypse. Reasonable laws still exist to enforce transportation safety. Deregulated taxi drivers will still have to operate an insured, road-worthy vehicle while sober and obey all traffic laws. Croft’s ordinance just removes the regulatory burdens that are unique to taxis and not their competition.

This is a positive move by all accounts. Taxi drivers are failing to compete because so much of their activity is determined by the city government, which is not tuned into the special needs that customers desire. Drivers understand passengers better than bureaucrats do. Deregulation would allow taxi drivers to be their own boss, to some extent, and exercise circumstantial flexibility that the law does not bend for.

Of course, there are people who would rather penalize the ride-hailing competition than reform the taxis. Some would be pleased to just outlaw ride-hailing and restore the taxi monopoly, to the detriment of customers. Others believe that Anchorage should increase regulations on ride-hailing, so as to bring them up to the same regulatory standard as taxis. However, there is no legal function for that. Sec. 29.35.148 of the state law concerning ride-hailing services stipulates that the authority to regulate ride-hailing companies is reserved to the State of Alaska. The Municipality of Anchorage cannot legally increase regulations on ride-hailing.

More regulation shouldn’t be the automatic answer, anyway. Having the government put up barriers where they don’t need to exist usually hurts the customer. In the case of taxis, we see an example where such barriers hurt the worker as well. Taxi companies are losing business because ride-hailing alternatives are more flexible. We ought to give taxi drivers the freedom to innovate and lower their costs of operation.

Email your assembly representative and ask them to vote for Croft’s ordinance.