Tipping the Tax: How Government Surcharges Become Gratuities

Abstract

New York taxi screens suggest tips as percentages of the fee-inclusive total, so every government surcharge on the meter raises every suggested tip. We estimate the causal pass-through of statutory charges into gratuities: eleven cents of each legislated surcharge dollar becomes tip, about four-fifths of the rate at which riders tip the fare itself. Identification comes from six sources of quasi-experimental variation: surcharges that switch on and off at fixed clock times, the holiday calendar, a large repricing, a flat fare, and the spatial boundary of the 2025 congestion toll. The per-dollar estimate is stable across doses from $0.50 to $5.00 and in both directions, and riders absorb the charges rather than re-optimize. At the 2025 schedule, $141 million of government charges flow through the tip base each year, generating $15–21 million in gratuities that no legislature enacted; ignoring tips misstates the incidence of these charges.

Presentations

Cite

@unpublished{sotomayor2026tipping,
  title  = {Tipping the Tax: How Government Surcharges Become Gratuities},
  author = {Sotomayor, Tyler and Uceda-Sosa, Gabriel},
  year   = {2026},
  month  = jul,
  note   = {Working Paper, Columbia University},
  url    = {https://tylersotomayor.com/research/tipping-the-tax/}
}