Tax on Uber, Lyft rides in downtown Chicago set to triple Jan. 1

Tax on Uber, Lyft rides in downtown Chicago set to triple Jan. 1

Chicagoans will pay higher taxes on rideshare trips in 2020 as part of Mayor Lori Lightfoot’s first budget.

Commuting will soon become more expensive for Chicagoans who use ride-sharing apps, such as Uber and Lyft.

Included in Mayor Lori Lightfoot’s city budget – her first – approved Nov. 26 is a “restructuring” of the city’s tax rates on different ride-share options, which the city projects will generate $40 million annually.

The steepest increase will hit users riding solo in a special “downtown zone” covering the central Loop and surrounding areas, who’d pay a $3 tax on every ride – more than triple the current 72-cent rate.

Outside downtown Chicago, solo rides will spike to $1.25 from 72 cents, as would pooled trips within the designated zone downtown.

The new ride-share tax structure slightly lowers the rate of taxes and fees paid on shared rides outside of downtown Chicago, to 65 cents from 72 cents. The downtown-specific fee hikes will be active from 6 a.m. to 10 p.m. on weekdays.

The flat $5 fee tacked onto trips that run between the city’s airports and either downtown’s Navy Pier or McCormick Center remains unchanged.

Lightfoot first proposed the ride-share tax hikes in October, with the stated aim of reducing traffic congestion downtown. By substantially raising taxes on solo rides, she hopes to incentivize eco-friendly carpooling while generating $40 million in new annual revenue.

The city will hand a portion of the fees to the Chicago Transit Authority and the Chicago Department of Transportation, among other related investments, according to the mayor’s statement. The $40 million also will go toward closing the city’s $838 million deficit inherited from former Mayor Rahm Emanuel.

Chicago previously raised fees on ride-sharing services in 2017, when it became the first city to implement them to fund mass transit.

Lightfoot’s proposed fee structure follows from a congestion study the city conducted in 2015, which found a 271% spike in ride-sharing citywide. That surge was partially responsible for heightened traffic density, particularly in the Loop, according to the study.

The city’s analysis did not find high levels of congestion in neighborhoods outside the Loop or its bordering neighborhoods. However, individuals in neighborhoods outside downtown – including low-income areas on the west and south sides – will still pay the newly increased $1.25 fee.

That could impose an unfair burden on poorer residents. In fact, the city’s own data has shown that ride-sharing cars provide needed transportation services to low-income, predominantly minority areas which were long underserved by traditional taxicabs. Public transportation alternatives are often less reliable – or altogether nonexistent – in many of those areas.

While curbing congestion is a worthwhile goal, the city’s continued dependence new tax hikes and one-time revenue flushes to patch up routine budget deficits is not sustainable. Lightfoot’s inaugural budget – which was never truly balanced – does nothing to address the structural deficit driven by public pensions that will again confront the mayor next fiscal year.

Lightfoot should not repeat the mistakes of her predecessor by attempting to tax a shrinking city out of its severe, structural fiscal problems.

Lightfoot on the campaign trail declined to support the idea of changing the Illinois Constitution to reform pensions, as Emanuel did upon exiting office. The new mayor would be wise to acknowledge sooner than later that it isn’t too late to push for the only responsible, if politically difficult, path out of Chicago’s endless budgetary crises: constitutional pension reform.

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