Crash Taxes Bring Hefty Bills for Motorists

Dec. 12, 2010— -- Jay Middleton was moving his daughter out of college in suburban Philadelphia when her car rear-ended his. He told a policeman who was nearby of the minor fender-bender, obtained the officer's accident report and filed a claim with his insurance company.

No one was hurt and no traffic was stopped. Both cars in the accident -- Middleton's and his daughter's -- were able to drive off.

But a short time later, a bill arrived at Middleton's New Jersey home seeking nearly $300 for the cost of the police response.

"First I thought someone was playing a joke on me," Middleton says. "But after calling the police department and learning that this is a debt that I am liable for, I just -- I went ballistic."

Around the country, more and more drivers are being slapped with similar bills.

Strapped for cash, a growing number of municipalities have begun charging for responding to accidents -- services that have long been covered by taxpayers. Sometimes, the victim's insurer will pick up the tab for these new fees -- but sometimes the insurers will refuse to pay.

This past week, New York City joined the growing debate over what some are calling a "crash tax."

Mayor Michael Bloomberg announced the city wants to begin charging accident victims hundreds of dollars each as one way to help plug the city's multimillion-dollar budget deficit.

Crash taxes are just some of the extreme measures states and cities are taking around the country to counter billions of dollars in budget deficits.

In New York State, Gov. David Paterson has proposed legalizing ultimate fighting, a move that would generate $2.1 million a year. Arizona slashed its Medicaid program, leaving 98 residents ineligible for life-saving organ transplants.

California Gov. Arnold Schwarzenegger wants to open up the coast off of Santa Barbara to oil drilling to raise hundreds of millions of dollars in new revenues. And one of New Jersey's most dangerous cities, Camden, recently sent pink slips to about half of its 380-member police force.

Under Bloomberg's "crash tax" plan, car fires with injuries would incur a bill of $490. A car fire with no injuries? That would cost $415. And a crash with no injuries would receive a "discount" -- a bill of only $365.

Although critics said the New York Fire Department could easily find more savings in its budget -- such as by eliminating the paid drivers of fire chiefs -- Bloomberg said he had little choice.

"Would you like them to close fire houses?" Bloomberg said. "I don't think so. So they've got to raise the money."

Some municipalities have instituted accident-recovery fees at the prodding of collection companies that have offered their billing services, in return for a percentage of the revenue raised.

The AAA and the insurance industry oppose such fees, saying accident response and public safety are basic government services that should be paid for with general taxes.

"It's basically double taxation," said Robert Passmore, senior director for personal lines at the Property Casualty Insurers Association of America, a trade group. "People feel they have already paid for these services."

The insurance industry, which says it is trying to hold down the cost of premiums for consumers, even has a Web site – accidenttax.com – to rally opposition to the fees.

Thanks in part to the industry's lobbying, 10 states have placed some limits on such collections: Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Missouri, Oklahoma, Tennessee, and -- after Jay Middleton's fender-bender -- Pennsylvania.

But Pennsylvania's law only prevents police departments -- not fire departments -- from charging fees.

Paula Callahan said she was shocked when she received a bill from the Irwin, Pa., Fire Department for $1,576 for responding to an accident in which his car was totaled.

Itemized charges on the bill included $50 for brooms, $50 for shovels and $175 for traffic cones, she told WTAE-TV in Pittsburgh.

"I was floored. First of all, what broom costs $50? Shovel $50?" said Callahan. "I think that's outrageous. It's a volunteer fire department. They show up at the scene whether you call them or not."

Irwin Fire Chief Justin Mochar told WTAE that "the $50 for shovels comes prorated. I mean, obviously, if you break equipment it needs replaced." He conceded, "It's a shock at first, but as you can see, I can point you to that truck. That truck is $1.2 million with all the equipment on it."

Still, some municipalities have backed off imposing such charges after complaints. New Yorkers will have a chance to weigh in on Mayor Bloomberg's proposal at a public hearing next month.