This actually can be argued as starting in the 1930's. It was cheaper for companies to buy a car and use it as a taxi than it was for a city to lay track, build a streetcar, and maintain the whole system. I just wrote a short seminar paper on this exact topic happening in San Antonio. I'll see if I can link my sources tomorrow morning when I'm not on mobile.

The short answer is that cars were cheaper than building and maintaining streetcar systems, many of which were private companies in contract with the city they served. Mix that in with taxi companies charging the same rates as streetcars and it's easy to see why taxis became the dominant mode of public transport for decades.

In all but the smallest American cities, streetcars were replaced by buses running essentially the same routes. At the time, this was generally seen as progress, because the new rubber-tired buses were smoother and quieter than streetcars, could be run with one-man crews, could load passengers safely at the curb, could detour or maneuver around obstacles, could easily be extended into new areas without the enormous cost of track and overhead wiring, and could run more frequently for the same cost. In most cities, the track and streetcars had been deteriorating for decades, and the transit companies were private enterprises, given no public subsidy or assistance.

The need for public subsidy to transit service became apparent in most cities in the 1950s, though a few private-enterprise systems operated into the 1970s. A few cities began to subsidize the private companies, many cities took over failing transit services and made them public agencies, and in a number of small cities, transit service simply disappeared.

Interest in public transit was jump-started by the Oil Embargo and energy crisis that began in 1973, and the late 1970s saw new agencies formed and others reinvigorated. In the early 1980s, Edmonton, Calgary, and San Diego began projects using modern European tram vehicles on mostly segregated guideways with widely spaced stops to create new rail lines, the concept we today call light rail in North America.

A half-dozen North American cities never abandoned their "streetcar" lines, though most of those lines had substantial off-street route segments that made them very different from traditional streetcars—which survived only in Toronto and New Orleans. Some small tourist or heritage streetcar operations began serving as downtown shuttles in the 1990s, and in 2001 Portland (ore.) opened the first modern streetcar installation in North America.