Taxi Medallions in DC: Who Would Win and Lose?

Today’s lesson in political economy: the looming battle over Washington’s cab market.

Three members of DC’s City Council (Marion Barry, Harry Thomas, Jr., and Michael Brown) want to require every taxi to have a medallion. The number of medallions would be much smaller than the number of cabs on the streets today.

As I noted a few months ago, this proposal would harm consumers more than it would help drivers. With fewer cabs on the road, it would be harder for passengers to find a ride and easier for drivers to turn down what they perceive as undesirable fares. If medallion prices rise, it may also make it easier for taxi drivers to lobby for higher fares in the future. All of that adds up to fewer cab trips.

The sponsors reportedly have close ties to some taxi drivers, so it isn’t surprising they favor drivers over consumers. What is interesting, however, is how they would favor some drivers over others.

The favored? Drivers with two or three decades on the road who are DC residents. In short, long-time incumbents who can vote.

The disfavored? Drivers with less experience or who live outside the district. In short, entrants and those who can’t vote.

This favoritism shows up in several ways in the proposed legislation:

  • Medallion prices. Under the proposal, initial medallion prices would vary by a factor of ten. A DC resident with 30+ years experience could buy a Class 1 unrestricted medallion for $500. A DC resident with 20+ years experience would pay $1,000. A non-resident with 20+ years would pay $4,000. Other qualifying drivers – if I am reading the proposal right, these would be DC residents who have filed DC income taxes for at least five years – would pay $5,000.
  • Right to purchase medallions. DC residents have priority over non-residents for most medallions, and priority further depends on seniority.
  • Property rights. Under the proposal, most medallions would become the buyer’s property and could be assigned or sold in the future. That means the driver would get the benefit of any price appreciation in the future. But that isn’t true for one category: Class 5 medallions that would be created for non-resident drivers who don’t get Class 1 through 4 medallions. Those medallions are not property and cannot be transferred; once the driver stops using them, they would be gone, and the number of taxis would decline further. (By the way, the price of Class 5 medallions is not specified in the legislation; instead it is left up to the Taxicab Commission.)

Bottom line: The proposal is a classic illustration of how the regulatory system might be used to favor (a) an organized group (taxi drivers) over a non-organized one (consumers), (b) incumbents over entrants, and (c) residents over non-residents.

3 thoughts on “Taxi Medallions in DC: Who Would Win and Lose?”

  1. I find merit in the concept of Medallions, however it seems they are being applied arbitrarily to the wrong group. Instead of Medallions for Taxis, there should be medallions for lobbyist in Washington D.C. – they should be given by lottery, expire in one year and be limited to exactly the sum of the current number of Senators and Representitives.

    One Lobbyist per Congressman would make it much easier to track influence and bribery, the lobbyists would be restricted to only lobbying their assigned politician, violations would invoke capital punishment by hanging on the floor of the New York Stock exchange.

    Medallions are a brilliant idea when properly applied. Perhaps we could issue Medallions for bankers as well. Is there no field of endeavour that could not be improved by the judicious use of this mechanism?

    Think of how America might be today if perhaps Economist were required to have Medallions. Why limit ourselves to Taxi Drivers when the whole world could benefit by this technique?

  2. Dc taxicab industry is unique it has majority owner /operatorsb .under this legislation for medallion , 95 percent of the drivers do not qualify and 98 percent of the cab companies.if John ray the lobbyist who is pushing this legislation wins .dc medallion systems are tailored to special interest groups and will reduce competition,leaving the consumer standing at the curb with inferior service. I

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