$.50 is already lower than the IRS rate ($.58 this year).

It may be a little conservative, but it's not crazy. You absolutely should be computing TCO of the vehicle and amortizing that if you are driving for a service like Lyft. What fixed costs do you think don't fully apply?

Time based depreciation and registration, insurance, and property/excise tax are all fixed costs that apply whether or not the Lyft driver takes that 300 mile round trip or parks the car that day.

That argument applies to any similar business though, so while I think I get where you are coming from I don't know why you would treat Lyft specially, here.

When considering “I’m being offered $300 for a 600 mile drive; is that more profitable (and by how much) than parking the car and watching TV instead?”, you should consider only those costs that vary with usage rather than those that you’d incur anyway.

When considering “Should I buy a car to drive Lyft?”, you should consider all costs, of course.

Ok, I see where you are coming from, but as far as I can tell for the majority of cases it seems that uber/lyft drivers are effectively running small businesses (notwithstanding the PR efforts to convince people it is "on the side"). So the realistic comparison is what other earning can I do in that time, not "sit on the couch", so the TCO comes in.

Don’t you need some sort of commercial insurance if you’re driving people around for money?

Why not? A Lyft vehicle will depreciate a lot faster than a normal car, and Lyft won't let you drive a junker.

A Lyft vehicle will depreciate, per mile, at nearly exactly the same rate any other car would.

Exactly, so fixed costs need to be included

The large majority of costs associated with a car are mileage not time. Somewhat less true in northern climates because of winter salt and there are some fixed costs like excise tax and (kinda sorta) insurance but it's mostly variable.