The city is requiring scooter companies to pay a fee, which is similar to a specialized tax
If you've been Downtown, in the Short North or in the Brewery District at any time in the past two months, you have probably noticed that scooters have taken over the town.
California tech startups Bird and Lime have stormed the city, deploying hundreds of shareable, dock-less, electric scooters at locations across Columbus and prompting the city to issue rules to govern the new technology. The rules break down into two major categories: regulations and fees.
As far as regulations go, some of them are aimed at helping low-income residents. These include regulations ensuring unbanked residents can use the technology and guaranteeing that scooters will be available in low-income neighborhoods.
There are also regulations limiting the number of scooters. Up to eight companies will be licensed in the city, and each company will be allowed to operate 500 scooters at a time. These regulations could help guard against the monopolization of the market but could also be a constraint to the market if the service grows in popularity.
But let's talk about fees. Each company will be required to pay a $500 fee to operate scooters, then $75 per scooter operated. That means a company operating the maximum 500 scooters would pay about $38,000 per year in fees.
From an economic standpoint, a fee is really just a very specialized tax: It's a required payment to the public sector. There are three major economic reasons to levy a tax: to raise revenue for programs with net economic benefits, to reduce inequality and to discourage negative side effects of commercial activity.
Scooter fees are not a great way to raise revenue. The most these fees could raise currently is $300,000, which could fund some small programs, but ultimately taxes for revenue should be broad-based, like income and sales taxes, so they don't impact the functioning of the markets they impact. That being said, political constraints to higher income, sales and property taxes can make fees more attractive as revenue generators.
A scooter fee could also be a way to reduce inequality, especially if the revenue is used to help lower-income people through cash transfers, targeted programming or targeted economic development. But income and property taxes are more direct ways to remedy these problems, making specific fees on services like this a second-best alternative.
The best justification for fees is the potential negative side effects of scooters. The twin problems of safety and the public nuisance of incorrectly parked scooters justify a tax to capture the cost of these scooters to people who are not using them.
The city has wisely included regulations requiring scooter companies to share data on scooter locations, usage, condition and injuries. This will help the city set better fee rates in the future. Tying these fees to the cost of third-party injuries and scooter parking nuisances will make them even more effective.