Extortion is perhaps not the most accurate word, going strictly by its definition. Anyway, the objection isn't to taxation of taxis, but rather to outright excluding new entrants to the taxi market. Which many cities do, via the medallion system.

I must admit, I don't see how it's extortion. It's capitalism at it's finest (by forcing the consideration of externalities as a free-market commodity). Since space in the streets is a fixed size-resource, supply and demand work to price medallions accordingly. If anything, the city sells medallions (referring to NYC) at a rate much lower than their actual value on the free market.

Putting an absolute cap on supply, which is what medallion programs do, is not a free market solution.

If you feel that use of the streets is not being rationed efficiently, or that heavy users of the streets are not paying enough relative to light users, then you can impose some kind of sliding scale or conditional tax on street use. This is not at all the same as an absolute cap on supply.

by definition, the city selling a fixed quantity of medallions is NOT capitalism at its finest. enabling an infinite number of providers to charge any price for any service they want, then letting those with the best offering win, is capitalism at its finest. the moment the government gets involved in limiting distribution you veer away from open markets/capitalism.

not that i'm a huge fan of unfettered capitalism, but just clarifying...

Some people have a hard time grasping the idea that you can be against unnecessary, foolish laws without being for companies that flout them.