The case for levying a road user fee on ride-hailing companies.


The policy journey of São Paulo, Brazil, a vast metropolitan region of 20 million people, has been telling. The city council initially banned all ride-hailing services via apps, spurred on by allies of the taxi industry. Other parties, recognizing the inevitable popularity of Uber as well as two more homegrown companies, 99 and Easy Taxi, pushed back. The compromise allows the companies to operate, but charges them for the use of streets per mile. A sliding scale was established—more if in the city center during peak hours with only one passenger; less for more passengers, cars in underserved areas, electric vehicles, women drivers, and accessible vehicles. A standing committee meets regularly on whether the charge needs to be modified. In the process, the city gets some raw data that can help with mobility policy.


The charges—for the privilege of using a public asset, the roadways, for commercial purposes—are estimated to bring in $50 million per year. Nearly a year after the policy was set, the experiment is going well, said Ciro Biderman, who recently left his position as chief innovation officer for São Paulo, where he led the design and rollout of the charges on transportation network companies.

The policy is interesting for reasons beyond the money. Few cities even think to charge for the use of streets built with taxpayer dollars, though streets can be between one-quarter and one-third—conservatively—of the urban public realm. In the U.S., charges for the use of streets typically come in slightly sideways—the gas tax, for example, plus licensing fees, tolls, and parking. Congestion pricing—charging drivers for vehicles in the city center—has been successfully instituted in London and Singapore, and New York City is said to be mulling another try; lawmakers have proposed a system of electronic tolling for Boston’s roadways as well.

But the notion that users should pay for the roads they use isn’t as novel as it may appear: It’s a form of “Vickrey taxation,” named for the economist and Nobel laureate William Vickrey (1914-1996). “In no other major area,” he observed in 1963, “are pricing practices so irrational, so out of date, and so conducive to waste as in urban transportation.”