Backlash Growing Against Automobile Accident Taxes

Published July 1, 2009

As local government officials struggle to balance their budgets, some are trying to charge a “user fee” for emergency services delivered at the scene of an automobile accident. Their constituents are fighting back.

The fees do not replace, but rather are in addition to, property and other taxes already paid by local residents for local services. Elected officials see accident fees as a way to increase revenues. Critics see them as auto accident taxes.

The critics have been winning taxpayers, drivers, and lawmakers to their side. Since 2007, drivers and auto insurers together have led successful legislative initiatives to ban auto accident taxes in Arkansas, Georgia, Indiana, Missouri, Pennsylvania, and Tennessee.

This year insurers, led by the Property Casualty Insurance Association of America, are urging lawmakers in Alabama, California, and Florida to prohibit local governments from imposing an automobile accident response service fee on any person or insurance company. The PCIAA’s 1,000 member insurance companies write more than half the nation’s auto insurance.

Bill to Ban in Florida

The issue is coming to the forefront in Florida. A measure sponsored by state Sen. Mike Bennett (R-Bradenton) and state Rep. Nick Thompson (R-Fort Myers) would ban cities and counties from charging the fees, which currently range from $180 to $200 for police response and $600 to $800 for fire departments.

In an interview with the Providence News Journal, Bennett said he believes auto accident fees “are no more than double taxation.”

Thompson told the Miami Herald, “You may be in a city in the state and get rear-ended and you’re going to get a bill after that vehicle crash. I don’t fault them for trying to raise revenue. I just don’t think this is the right way to do it.”

Local elected officials, assuming the accident fees will be paid by a driver’s insurance company, don’t consider the fees a serious burden on drivers. But accident fees ultimately increase the cost of insurance. And drivers who do not have collision coverage—either they’ve bought only liability coverage, or they’re uninsured entirely—are stuck with the full bill.

Discrimination, Cash Windfalls

Officials in some locales have responded to citizen complaints by charging only nonresidents. Others charge only drivers who have collision insurance. But such accommodations make the policies unfair, discriminatory, and possibly illegal, say critics.

The PCIAA points to Section 2 of the 14th Amendment to the U.S. Constitution, which states, “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens … nor deny to any person within its jurisdiction the equal protection of the law.” That means government cannot arbitrarily charge one person but not another for identical services.

Private collection companies are driving the push for auto accident taxes by approaching local governments with promises of a cash windfall. But it’s also a windfall for the collection firms, which bill the driver’s insurer or the driver directly, usually for a fee of at least 10 percent.

William H. Stander ([email protected]) is assistant vice president and regional manager for the Property Casualty Insurers Association of America. Matthew Glans ([email protected]) is a legislative specialist in insurance and finance for The Heartland Institute.

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