[s54b32dd]

>If they have to raise prices above traditional cabs (highly unlikely)

I don't think you realize how much it would damage their business model's profitability to have to pay payroll taxes on all their drivers. It's not just about offering a better service to consumers; Uber/Lyft would emphatically not have this many backers if their business model weren't insanely profitable. If profit margins shrink, poof, there goes funding.

[SilasX]

Margins are also about prices, not just expenses. Depending on the shape of the demand curve for Uber-like services vs traditional taxis, they may be able to pass along a lot of that cost to customers -- assuming similar competitors would also face the new cost structure.

Anecdotally, Lyft/Uber are so much better that they could charge me a lot more and still be preferable, though obviously they expect the margins would be smaller. I doubt it would be business-model-killing smaller though.