Taxi cabs: Deregulate and tax

Matt Yglesias says people who want to see less car ownership, less space used for parking and less driving overall "should support relaxing regulatory curbs on the number of taxis allowed to operate in a given place". I think I'd like to see this happen in London, with one small condition: they pay a per-kilometer tax to cover their external costs of congestion, pollution, noise and death/injury through collisions. Currently we don't tax these external costs so they create a lot of problems for everyone else. Removing one type of economic distortion without removing the other will just lead to more of these problems.