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Crash Tax’ Proves Unpopular And Unprofitable

Audio

Aired 2/14/11

Cash-strapped cities around California have adopted a new emergency response tax as a way to raise revenues. But the tax is not only unpopular, it is not raising as much money as expected.

Cash-strapped cities around California have adopted a new emergency response tax as a way to raise revenues. But the tax is not only unpopular, it is not raising as much money as expected.

An emergency response tax, sometimes called a “crash tax,” charges people involved in traffic accidents for the cost of fire, police and ambulance response. More than 60 California cities have adopted the tax, usually for non-residents. Fees can range from $400 to more than $2,000.

The City of Chula Vista considered the tax last year but rejected the idea as double taxation. The only communities in San Diego to adopt the tax so far are Fallbrook, Spring Valley and Oceanside.

But Oceanside City Councilman Jerry Kern said the city was told it would earn $260,000 with the crash tax, and so far this year it has only raised about $15,000. Now Kern says, the city will have to find the money to cover the hole in the budget

“The whole program is being oversold as some kind of a budget fix,” Kern said, “and in the long run it is detrimental to your budget process.”

Peter Moraga of the Insurance Information Network, an insurance industry advocacy group, says third-party billing companies that take 17 percent of the fees are the ones pushing the tax.

“These are companies that have found a nice nitch in which they can go to these cities and promise some pretty hefty windfalls,” he said, “and they also say insurers do cover them, but there’s no reference in the auto policy for coverage of these types of fees.”

Moraga said if insurance companies are mandated to cover such fees, insurance rates will go up.

The City of Vista in North County will consider tomorrow whether to adopt a crash tax to help plug its $9 million budget hole.

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