Taxis Forced to Take Credit Cards

Score one for Wall Street.

This morning, the Council adopted a new regulation on taxicabs.  This appears to be a win for Citigroup, JP Morgan Chase & Co., Bank of American Corp, and various other financial institutions and individuals that make up the owners and shareholders of Visa, MasterCard, American Express and Discover.

But it's a loss for Minneapolis taxi drivers.

This regulation, proposed by Council Member Schiff, will force all taxis in Minneapolis to accept credit cards.  While there are some good reasons to do this - CM Goodman mentioned encouraging drunk folks who may have spent all of their cash on alcohol to take a cab - on balance it's a bad idea.

I believe this because I take very seriously the concerns I heard from taxi drivers during the public hearing.  Many of these folks are recent immigrants (and many live in Ward 2), and they are just scraping by.  Driving a cab is not a lucrative line of work.

They made very clear how this regulation will impact their lives.  Credit card companies, and the banks that are the end of either end of every transaction charge fees for each transaction.  The City cannot require the cab companies to eat these costs, and we cannot require that these costs be passed along to customers.  We have capped the fees that can be charged by cabs, so the total cost of a cab ride cannot rise.

What this almost certainly means is that the credit card transaction (or interchange)  fees will come out of cab drivers' income.  But that's not all.  Many drivers are "independent contractors" who lease their cabs from the companies for a daily fee.  The fee is due on the day they work.  But credit card income does not make its way to drivers for several days or even weeks.  This puts drivers in a terrible spot, in which they will have to pay more to the company for a day's lease than they have actually made that day.  Imagine working all day, only to owe more at the end of the day than you have on hand!

There are other arguments against this regulation.  While some cities have gone in the direction of requiring credit cards, it's clear that most have not.  Council Member Schiff noted that the taxi industry is heavily regulated, as are bars and restaurants.  But we do not require bars and restaurants to accept credit cards, and we shouldn't!  I can't imagine trying to tell the Hard Times Cafe, Seward Cafe, or other Second Ward businesses who do not accept plastic that the City will now force them to.  Council Member Goodman noted that we want more people taking taxis and pedicabs - but we don't force pedicabs to take credit cards either.  Yet.

I want to put this regulation in a broader context.  Who is going to benefit from this new regulation? 

• Taxi customers that have and want to use credit cards, clearly.  This regulation increases their convenience. 
• Taxi companies, arguably - more rides mean more business, but those who choose to share some or all of the added cost may also suffer.  
• The big banks that operate credit cards definitely benefit.  More transactions using credit cards, each subject to a steep fee, will substantially swell their already high profits.

Now, who suffers?  Taxi drivers.

Note that the group being forced to take the financial hit is the least wealthy, more likely to be recent immigrants, and the most likely to be young and people of color.  Taxi customers have to be somewhat well-off enough to take one of the most expensive modes of transportation available (much more than walking, biking, or using mass transit, and usually more expensive than driving).  Taxi companies aren't the most profitable businesses in the world, but their owners are nowhere near as poor as their drivers.  And the big banks are making record profits.

Is this surprising?  Unfortunately, no.  This is a clear pattern of government action at all levels: the transfer of wealth from the bottom to the top. And I regret that our City government is complicit in this as well.

One last thing.  I find fascinating that this Council passed a feel-good resolution late last year, by a substantial majority, in favor of the principles of the Occupy Wall Street protest movement.  Now, a couple of months later, we pass a law that is a windfall for Wall Street, coming out of the pockets of some of the poorest residents of Minneapolis.

I was one of only two votes against this ordinance, joined by Council Member Tuthill, who knows from owning a small business just how onerous the credit card companies' practices can be.