HARRISBURG — Uber is trying to sell Pennsylvania lawmakers on a partial solution to the two-month budget impasse, telling them it supports taxing ride-hailing trips statewide to raise desperately needed revenue for public transit.
But the pitch comes with a big stipulation: Uber will only support expanding the state’s 6% sales tax if the commonwealth classifies app-based drivers or couriers as independent contractors, not employees.
Doing so would achieve a longtime goal of tech firms and render moot a 2020 state court ruling that found that Uber drivers are not self-employed. That ruling allowed drivers to receive unemployment benefits they had previously been denied, along with other labor protections like workers’ compensation.
Uber also supports requiring the same app employers to contribute a limited amount of money to flexible savings accounts that workers can use to pay for health insurance or sick days.
Freddi Goldstein, Uber’s lobbyist in the state Capitol, told Spotlight PA that the company has lately been shopping its proposed compromise to legislative leaders and the Shapiro administration.
Transit agencies across Pennsylvania, most notably SEPTA in Philadelphia, say they need more state money to stay afloat. Lawmakers have so far struggled to agree on a way to raise more revenue, either through legal cannabis or a tax on slot-like skill games.
State Senate Republicans are on board with Uber’s proposed bargain. Caucus spokesperson Kate Flessner said in an email that it “would be a fair and reasonable way to bring uniformity to ride share companies, while helping to ensure they continue to have a strong presence in PA.”
State Senate Majority Leader Joe Pittman (R., Indiana) had previously expressed openness to expanding eligibility for the sales tax as a revenue source, although he offered no further details at the time.
But state House Democratic spokesperson Elizabeth Rementer said that her caucus is opposed to trading away labor rights for extra revenue.
“Depriving workers of legal protections and basic benefits such as health care and social security in exchange for a … contribution to a flexible savings account is no bargain for the taxpayers left with the tab,” Rementer said. “We appreciate the interest shown by the ride share companies in their efforts to find a long-term funding solution for our mass transit crisis, but this proposal misses the mark.”
A spokesperson for Gov. Josh Shapiro declined to comment.
Where did this idea come from?
The idea of funding transit by taxing ride-booking trips isn’t new.
It was first proposed by Transit for All PA, a union-backed grassroots coalition. In a policy memo, the group argued the expanded tax would “not disproportionately burden already marginalized communities,” since users are typically wealthier, and was “unlikely to meaningfully change behaviors and anticipated generated trip revenue.” The group estimated such a proposal would raise approximately $250 million annually.
Pennsylvania exempts traditional taxi services and other ground transportation purchases from sales tax. However, at least two states and multiple local governments tax ride-hailing trips.
This spring, Democrats in the state House and Senate introduced bills to implement the tax, which have since languished in committee. But they still caught the attention of a powerful player in the gig work universe.
Goldstein, the Uber lobbyist, told Spotlight PA that the ride-booking giant believes a deal in which Pennsylvania taxes rides in exchange for classifying all app-based drivers and couriers as independent contractors would net the state approximately $100 million annually.
“We want to be good neighbors in the state,” Goldstein added.
The idea to officially classify gig workers as independent contractors has a longer legislative history in the commonwealth. Last session, such language was included in a Republican senator’s proposal to establish “portable benefit accounts” for workers who deliver food, transport passengers, walk dogs, or are otherwise hired through an app-based service.
It would have required app-based companies to contribute money into these accounts, which workers would be able to use to pay for things like health care premiums or to compensate themselves for sick days.
A GOP-controlled state Senate committee advanced the legislation, but it didn’t get a full chamber vote and wasn’t reintroduced this session.
Along with splitting the state House and Senate, Uber’s proposal divides business and union advocates.
The state's Chamber of Business and Industry, a pro-business advocacy group, backed it as part of an overall effort to fund infrastructure in the state, arguing that the move “would not only generate revenue but also benefit consumers by providing stability to the industry.”
"We understand the gravity of the moment and appreciate the sentiment expressed by many lawmakers that all options should be on the table,” the group wrote in a statement this week.
But the independent contractor language in particular has previously inspired stern opposition from organized labor.
In a letter to lawmakers last year, the Pennsylvania AFL-CIO, a federation representing tens of thousands of unionized workers, said the state Senate bill would misclassify gig workers and deny them public benefits.
“Simply put, the misclassification of workers has allowed these companies to bypass providing essential employee benefits and paying their fair share of taxes to the detriment of workers, high-road employers, our schools, and our communities,” the letter concluded.
State Sen. Nikil Saval (D., Philadelphia), a sponsor of a bill to tax ride-booking trips, struck a similar tone in an interview with Spotlight PA. Since ride-hailing companies share the roads with public transit, he thinks it would be fair to make sure they also help pay to maintain the commonwealth’s infrastructure.
But Saval is opposed to the independent contractor language. Tech companies, he said, “are fully disinterested in supporting transit. They're just interested in a deal that benefits them.”
“We're out here to support transit, not to screw workers at the same time,” he said.
Shapiro’s history on this issue is mixed. The governor voiced support for a 12-month pilot program that delivery company DoorDash ran in Pennsylvania last year, in which it paid into benefit accounts for workers. At the time, Shapiro called the pilot “a positive step forward,” and said his administration “looks forward to seeing the results of this program.”
A DoorDash-commissioned study of the pilot program found that it included 4,400 app workers, who received on average $233 — though amounts varied by time spent on the job.
However, Shapiro did not support the state Senate bill last year, a spokesperson said at the time.