If getting into a car accident weren’t enough of a headache already, cities all over California have been adding fuel to the fire by adopting a “crash tax,” legislation that requires the at-fault driver’s insurance to pay for any clean-up fees.
“Over 70 cities in California have adopted [the ‘crash tax’],” State Sen. Tony Strickland (R-Moorpark) said in a recent interview with the Sun.
At the end of last year, Strickland introduced SB 49, a bill that would prohibit any future municipal legislation allowing cities to be reimbursed by insurance companies.
According to the bill language, SB 49 would also write into law that the availability of emergency response resources is a statewide issue and not a municipal affair.
Santa Maria hasn’t adopted such a tax, city officials said, but it does recover costs from accidents caused by drivers who are under the influence of drugs or alcohol.
“The city sends bills directly to the at-fault driver, not the insurance company,” city spokesman Mark van de Kamp said in an e-mail to the Sun. “As a result, only 10 to 15 percent of such billings are recovered.”
However, Santa Maria hasn’t ruled out the possibility of handing emergency bills over to insurance companies for repayment.
“I have been researching it,” Van de Kamp said. “The City Council is aware that we need to seek and maintain services, but the traditional income is languishing.”
Sales, property, bed, and vehicle license taxes are considered to be traditional income.
The fact that citizens are already paying such taxes, however, and would also now have to pay a clean-up fee through their insurance, is what motivated Strickland to pen the legislation.
“It’s a dire time for working California families. They’ll have to pay out of the pocket, and they’re just barely squeezing by,” Strickland said. “It’s a double tax.”
He added that the tax could act as a deterrent for possible tourists, who would, in the event of an accident, have to foot a bill normally covered by their contribution to sales taxes.
Strickland also claimed that the fee doesn’t work because of the third party involved: the recovery firms that take most of the money.
Van de Kamp, however, said such firms only charge 14 to 20 percent.
EF Recovery is a business that’s been catering to cities that want to use a third party to recover fees from insurance companies. Company representative Jim Figueira said he’s been following the legislation closely.
“It’s a really broad bill,” he said of SB 49.
He believes that the bill, if passed, will let insurance companies off the hook for what they have to pay for.
“[EF Recovery is] billing for specific actions. [We] pay insurance companies to cover these,” he said. “If the insurance companies get off the hook, then those items get paid for by the taxpayers.”
Figueira believes the insurance companies are at the heart of this bill. According to the non-partisan website MAPLight, Strickland has received $201,407 in campaign funding from insurance companies.
“They say that they are looking after the taxpayers,” he said. “But when have they ever cared for the taxpayers? They’re protecting their profits.”
That’s also where he speculates the name “crash tax” comes from: insurance companies.
“It’s a knee-jerk reaction, and it sticks in the mind,” he said of the euphemism.
Strickland reiterated many times that the ban will in fact fight a “double tax.” A pamphlet sent to the Sun from the EF Recovery program carries a different message: “If one pays for a service twice, then, yes, it is a form of double taxation. However, if a taxpayer pays an insurance company for coverage and the city does not actively pursue the recovery of the covered expense, that is a double taxation to the taxpayer.”
Figueira thinks the bill, which is expected to be voted on in mid-February, won’t pass.
“There’s so much politics involved in Sacramento,” he said. “As it sits right now, it won’t pass. As it’s structured, it’s a bad bill.”
Intern Henry Houston can be contacted at intern@santamariasun.com.
This article appears in Jan 27 – Feb 3, 2011.