A New Rideshare Tax Would Worsen San Francisco’s Cost of Living Problem

San Francisco voters are voting this November on a ballot measure, Proposition L, to tax the gross receipts of Transportation Network Companies (TNCs) and autonomous vehicle companies operating in San Francisco.

The measure would tax companies offering rideshare services in the city — namely Uber, Lyft, and Waymo. The tax would apply to the gross receipts of these companies, not profits, imposing graduated rates depending on the level of revenue a company generates.

The rates are:

• 1% on taxable gross receipts between $500,000.01 and $1 million
• 2.5% on taxable gross receipts between $1,000,000.01 and $2.5 million
• 3.5% on taxable gross receipts between $2,500,000.01 million and $25 million
• 4.5% on taxable gross receipts over $25 million

The revenue from the tax would go towards funding Muni, San Francisco’s public transportation system, which is currently facing a budget shortfall. As federal and state aid are reduced, SFMTA needs $240 million annually to be solvent.

The tax imposed by Proposition L is expected to raise roughly $25 million in revenue annually, amounting to just over 10% of the total amount needed by SFMTA to fund Muni. While the tax provides some revenue, it does not provide a meaningful solution to the budget problems Muni and the SFMTA face.

Instead, the tax raises consumer costs in an already costly city. San Francisco’s cost of living problem has been well-documented, and adding additional taxes on consumer goods and services will further the problem by raising costs for consumers utilizing rideshare.

San Francisco already has a cost-of-living problem

San Francisco is already known for being an expensive city to live in. Economist Group’s Economist Intelligence Unit (EIU) recently rated San Francisco as one of the world’s top ten most expensive cities.

• According to an analysis by SFGate, utility costs in San Francisco were 67.5% higher in the San Francisco metro area than the national average. These utility costs contribute to the high cost of living in San Francisco.

Bankrate provides a breakdown of the categories of living costs and where San Francisco lies within each category. Food costs contribute to household costs, and Bankrate states that food costs in San Francisco are 31% higher than those in the rest of the U.S.

• Transportation costs are high in San Francisco as well. According to Bankrate’s 2023 article, “The average cost of a gallon of gas in the city as of mid-May was $4.79, according to AAA, as compared to $3.53 for the country overall.”

According to a 2024 CNBC article, San Francisco was the second most expensive city in the U.S. to rent in, second only to New York City. According to the analysis, the average rent in San Francisco was $3,139, which requires an income of $125,545 to rent comfortably. That income level is over twice the annual median salary for full-time workers ($59,228 — BLS). According to Kiplinger, San Francisco was the fifth most expensive housing market in the U.S., with a median home price in July 2024 of $1.475 million, meaning half the homes for sale were listed for more than $1.475 million. Whether renting or buying, housing prices in San Francisco are higher than virtually all other cities in the U.S.

San Francisco residents already face high costs in housing, food, transportation, and utilities. Proposition L would make living in San Francisco even more expensive. How much more will this cost consumers who use rideshare?

Proposition L will make living in San Francisco more expensive

Adding this new tax would increase the cost of living, worsening an already bad problem. The Controller’s analysis of Proposition L estimates that the tax will raise $25 million annually. Companies forced to pay that tax will likely pass some or all of the tax onto consumers. How much higher will that be in terms of price per ride?

It is safe to assume that companies will pass on the total value of the tax, $25 million. In that case, the additional cost per ride can be estimated as equal to the $25 million divided by the total number of rides.

Publicly available information on California rides from Uber and Lyft indicates that between September 2019 and August 2020, 277,250,720 trips were completed. This is likely to underestimate the current number of trips completed, given that these data were partially recorded during the pandemic, and rideshare has expanded since these data were recorded.

However, these are the most recent publicly available data on completed trips. Note that this number includes only rides completed from Uber and Lyft services during the time period. Other companies offering rideshare services may be subject to tax and may not be captured in these calculations.

This number of rides, 277,250,720, is for the State of California, not San Francisco. Thus, I scaled this number down to represent the San Francisco population. To do this, I take the portion of California’s population in San Francisco and apply it to the number of trips completed. According to Census data, San Francisco represented 2.21% of California’s population in 2020. This yields a total number of annual San Francisco rides of 6,127,241.

If companies pass on the tax amount, the $25 million will be split across all rides in San Francisco. This will result in roughly $4.08 of additional cost per ride. For a roundtrip ride, this amounts to $8.16 in additional costs. Consider a consumer using rideshare for roundtrip rides three times a week — this amounts to almost $100 in additional fees per month.

In reality, these numbers are likely somewhat lower since the number of rides covers part of the pandemic, and rideshare services have since expanded. However, these additional costs will add up for consumers, even if slightly lower.

Costs could squeeze finances even further for riders in underserved parts of the city

Residents who live in areas underserved by Muni, transit deserts, may rely on rideshare to access other vital services and stores, such as doctors’ appointments, workplaces, grocery stores, pharmacies, childcare facilities, and more. If Proposition L passes, these residents will face higher rideshare costs.

Research from Junfeng Jiao and Chris Bischak at the Smithsonian in 2018 found that 22% of census block groups in San Francisco were transit deserts. Additionally, the research found that 13.5% of people living in San Francisco had unmet transportation needs. According to the Smithsonian’s analysis, residents living in these neighborhoods often cannot drive or do not own cars. In transit deserts, the demand for transit from these residents is not being met by cities’ public transportation infrastructure.

This is the most recent available data on transit deserts in San Francisco, and while not highly recent, it illustrates the unmet transportation needs of residents. For people still facing unmet transportation needs, rideshare companies may help to fill that void. This new legislation would cause an over $8 increase in roundtrip fares for those individuals. These increased costs will add up for households living in transit deserts who may not have other transportation options.

Living in transit deserts without access to affordable transportation can contribute to a negative economic feedback loop where economic opportunities are limited due to limited transportation options. Junfeng Jiao and Chris Bischak wrote,

“Lower access to transportation for poorer Americans creates a kind of negative economic feedback loop. People need access to high-quality transportation in order to find and retain better jobs. Indeed, several studies have shown that transit access is one the most critical factors in determining upward mobility. Poor Americans are likely to have lower-than-average access to transit, but often are unable to move out of poverty because of this lack of transit. Investing in infrastructure thus is a way of increasing social and economic equality.”

Rideshare services may provide some people living in transit deserts access to transportation alternatives, allowing them to circumvent the negative feedback loop described above. Taxing rideshare services will increase costs for these consumers, making it more difficult for them to access rideshare transit options.

Additionally, many people work non-traditional hours and may rely on rideshare for transportation needs instead of using public transportation. Many seniors and disabled residents may choose to utilize rideshare given its accessibility, which takes riders door-to-door on a single trip. All people who rely on rideshare will face higher prices, not just those who can afford the price increases.

While well-intended, Proposition L will make life harder for San Franciscans.

San Francisco is already extremely expensive — and adding additional taxes will only worsen the cost of living problem in San Francisco.

As rideshare companies are forced to pay this gross receipts tax, they will try to pass the cost of the tax on to their customers. Based on publicly available data, my research suggests that consumers could see price increases up to $4 per ride.

All customers will suffer from the new price increases, including people traditionally underserved by public transportation Some people in those areas may rely on rideshare as a means of transportation to jobs, medical appointments, childcare facilities, and more. These people will face higher fares if this tax is passed and later passed onto consumers.