Members of the Washington, D.C. council just passed a 5 percent tax hike on ridesharing services including top transportation companies Lyft and Uber.

The steep increase in tax from 1 percent to 6 percent was unanimously approved. This means that a $25 ride is currently taxed 0.25. However, under the new fiscal budget, it would be taxed $1.50. All rides that begin in D.C. will be covered by the tax regardless of the destination.

Funding For The Metro

The tax hike was passed to generate $23-$25 million annually to fund D.C.'s Metro next year. The said district has also pledged to dedicate $178 million to its transit system. To raise the fund, the district is also planning to increase taxes on liquor, beer, wine, hotel stay, and car rental.

Chairman of Metro board and district council member Jack Evans said that the fund for the transit system has to come from somewhere. He also added that nobody likes taxes but the money from the tax hike is going to help in fixing the Metro.

D.C. Mayor Muriel Bowser previously proposed a lower 4.75 percent tax hike rather than 6 percent. The mayor also met with Dara Khosrowshahi, Uber CEO, last April to clarify what the tax is for.

She said that this is how they are supporting what the Metro and region needs.

Objections On The Tax Hike

However, not all members of the council fully approve the hike.

D.C. Councilmember Brandon T. Todd has communicated his concern in a statement during the legislative meeting saying that although he was happy that the district has finally established a source for the Metro funds, he was disappointed about how the tax was being handled.

He also said that he was flooded with e-mails from D.C. residents that is why he has looked for ways in order to address their worries regarding the service. Furthermore, he added that he would pave the way to a stand-alone legislation in the coming weeks which would lower the service tax for ridesharing.

Additionally, Lyft also urged the D.C. Council to reject the tax proposal in a statement saying that the company is dismayed that the council voted to increase the tax without giving ways that would incentivize the use of shared rides.

Meanwhile, Uber pushed to tax passengers who opt to carpool at a lower rate than those who choose to ride alone.

Mayor Bowser is expected to approve the increase. It will take effect on Oct. 1.