D.C. Taxi Heist: How a new law would screw drivers and riders

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Jul. 09, 2011

Washington, D.C. is considering a bill that would require every cab driver in the city to own a special permit called a medallion. The total number of medallions would be capped at 4,000, which would reduce the current number of cabs by more than one-third and put thousands of drivers out of business. (The city government has no idea how many licensed cabs are in the district, though estimates range from 6,500 to 10,000.)

If that weren't bad enough, most drivers wouldn't have the option of buying a medallion. The first set of medallions would be offered for sale to the minority of cabbies who have been driving for at least five years and who live in Washington D.C. (Again the city government has no idea how many current drivers meet this criteria, but rising real estate prices and weak city services have led many drivers to leave the district.)

Who will be offered the next set of medallions, according to the bill? That would be cab companies, who could then rent medallions to drivers. This system would destroy the relatively open-access taxi industry in D.C., in which the majority of drivers are owner-operators free to make their own schedules and keep whatever money they earn on the job. In cities such as New York and Boston, drivers pay upwards of $800 a week to rent their medallions.

Cab riders would also suffer under the new regime. Reducing the number of taxis on the street will make it harder to catch a cab, especially in non-tourist neighborhoods and areas far from business districts. And the medallion system will almost certainly drive up prices. A 2010 study by D.C.'s own Department of Finance found that fares in cities with medallion systems are 25 percent higher on average than in cities in which the supply of cabs isn't restricted.

Given all that, why would the nation's capital consider implementing such a system? D.C.'s medallion bill was written by lobbyist and former city councilman John Ray, who was hired by taxi magnate Jerry Schaeffer. Ray has worked as a lawyer for councilman Harry Thomas, and it was Thomas who introduced Ray's bill in the city council. The other major sponsor of the bill: Council member Marion Barry, the former mayor best known for his 1990 arrest for smoking crack in a hotel room with a girlfriend.

In a recent letter in the Washington Post, Ray argued that because the cab industry is open entry and unregulated it's been susceptible to corruption. But in practice the DC taxi commission, which currently regulates the industry, has its own history of corruption. And the commission is so wary of scrutiny that when reporter Pete Tucker snapped a photo on his cellphone at a recent public meeting he was dragged out and arrested.

Reason.tv Producer Jim Epstein captured Tucker's arrest on his mobile phone. Later, Epstein was also arrested after resisting attempts by the taxi commission and us park police to confiscate his camera phone. When Tucker was arrested, cab drivers, stormed out of the meeting in protest.

For more on the medallion bill, read Reason's Sam Staley in the Washington Post on medallions, and on how regulation has spawned corruption in D.C.'s taxi industry.

Produced by Jim Epstein, with help from Kyle Blaine, Lucas Newman, and Jack Gillespie. Narrated by Nick Gillespie.

Approximately 6 minutes.

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