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What will the sharing economy cost U.S.?

June 13, 2013: 12:16 PM ET

Carpool in the high occupancy vehicle laneIf car ownership plummets, so will state tax revenue.

FORTUNE -- Sidecar CEO Sunil Paul said yesterday at a conference that U.S. auto ownership will be cut in half over the next decade thanks to social car-sharing services like his. It sounds ludicrous for any number of socio-demographic reasons, but what if you allow yourself to drink the battery fluid? What would the rise of companies like Sidecar mean for the country?

Less traffic? Likely. A cleaner environment? Probably. A massive cut in state tax revenues. Definitely.

According to an April study by the Center for Automotive Research, the auto sector was responsible for approximately $91.5 billion in state taxes for 2010 -- or around 13% of all such receipts. Included in that figure was $30 billion from the sale of new and used vehicles and $20 billion from vehicle registration fees. Not included were such things as excise taxes or title fees.

The U.S. Department of Transportation reports that 51.2% of new cars in 2010 was for personal use, so let's just use that figure even though the percentage of personal-use used cars is likely even higher.

That means that, if Paul's theory is correct, states would lose out on a minimum of 3.4% in annual tax revenue, or $23.4 billion in 2010 dollars. Not too good for those states that already are having trouble making budgetary ends meet (i.e., almost all of them). And that doesn't even take into account what would be lost from the $43 billion in federal revenue generated by federal fuel taxes and taxes on direct employment at car manufacturers, auto parts suppliers and dealers (or the resulting unemployment costs).

Now I know what you may be thinking: Won't some of that lost revenue be recouped from taxes collected on drivers for companies like Sidecar? Under the current structure, the answer would be no.

Sidecar views itself an an intermediary rather than an employer, so it doesn't issue 1099's or any other tax forms to its drivers. In fact, Sidecar doesn't even view its client transactions as payments -- it calls them donations. So does fellow ride-sharing company Lyft, although it does issue 1099's for drivers who reach over $20,000 and 200 "donations" in a given year.

Maybe all social ride-sharing drivers will accurately report all applicable taxes to state and local authorities, but it's highly unlikely. After all, you know any restaurant servers or bartenders who report 100% of their tips? Me neither, and they work in an industry that's been around longer than the country itself.

To be sure, there are all sorts of social and environmental benefits to car-sharing specifically, and to the larger notion of a sharing economy. But there also are significant national costs to decreased ownership of major goods like automobiles. At the very least, Paul and other sharing economy evangelists should be aware of both sides of the equation.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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