Chicago approves traffic congestion tax on ride-hailing services

FILE PHOTO: Lori Lightfoot speaks after being sworn in as Chicago's 56th mayor by Judge Susan E. Cox during an inauguration ceremony at Wintrust Arena in Chicago, Illinois, U.S. May 20, 2019. REUTERS/Kamil Krzaczynski/File Photo

CHICAGO (Reuters) - A proposal to combat traffic congestion in Chicago by increasing taxes on certain ride-hailing trips won city council approval on Tuesday as the city and ride providers accused each other of penalizing low-income passengers.

Mayor Lori Lightfoot’s plan increases the city’s tax on single-passenger trips and lowers the tax on shared rides, while imposing new surcharges on weekday rides in the downtown area to raise $40 million for the fiscal year that begins Jan. 1.

Ride-hailing companies Uber Technologies Inc UBER.N and Lyft Inc LYFT.O claimed the move would largely hurt low-income residents.

Earlier this month, the city’s first female African-American mayor accused Uber of trying to resist any kind of regulation by stirring up racial tensions.

Uber rejected her claims and said alternative proposals it offered would spare lower-income communities in Chicago’s South and West sides from higher costs, while raising more money for the city’s budget.

Reuters’ analysis of data that ride-sharing companies are required to disclose to Chicago shows fares for shared rides in the city have risen significantly over the past year, while fares for single riders have remained stable.

The price increases for shared rides predominantly affect Chicago’s low-income neighborhoods where most of carpool rides are booked, the analysis showed. Over this period of increased fares, carpool ridership fell.

Reporting by Karen Pierog; Editing by Chris Reese and Richard Chang