Out of Control Policy Blog

D.C. Council Takes Aim at Taxi Entrepreneurs

Some on the District of Columbia's city council really have it out for entrepreneurs. The city simply has too many of them. Why else would they consider an ordinance that would not only limit the number of taxis driving in the city but also substantially increases the cost to prevent new companies from competing?

The "Professional Taxicab Standards and Medallion Establishment Act of 2011" has little or nothing to do with standards and everything to do with extending city control over one of the most dynamic and entrepreneur-friendly businesses in the district. The Medallion Establishment Act would cap the number of taxis at 4,000 and give preferences to politically determined classes of vehicles. The Act would also create six classes of taxicabs, each of which would have to pay a different price for the medallion ranging from $1,000 to $5,000.

What may be most striking about this ordinance is that D.C. council members must be well aware of the pernicious effects medallion systems have had in other cities. In New York City, medallions sell for $641,000 for an individual and nearly one million dollars for a corporation.  In Boston, medallions sell for $400,000. These prices are way out of reach finanically for drivers who often are lucky to make $30,000 a year. A medallion system will effectively create and lock-in an oligopoly of cab company owners.

This is just another example of the implicit corruption that undermines economic opportunity in cities like Washington, D.C. Medallion systems are tailor made to further entrench special interests and reduce competition, leaving the consumer standing at the curb with inferior service.

Colleague Harris Kenny has also been following taxi regulation.

Samuel Staley is Research Fellow


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