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ACIC Seeks to Axe Sacramento Crash Tax Scheme

Source: Association of California Insurance Companies


Posted on 16 Aug 2010

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A proposed crash tax ordinance before the City Council sends a message that Sacramento operates like a small-town speed trap, gouging unwary non-resident drivers, according to Sam Sorich, president of the Association of California Insurance Companies.

Sorich intends to testify against the proposed ordinance, which is scheduled to receive a final City Council vote tomorrow at Sacramento City Hall.

The ordinance would impose a tax – or what the city calls a fee – on non-Sacramento residents who are involved in traffic accidents within the city limits. The fee would be imposed on at-fault, non-resident drivers.

“Sacramento is rightly proud to be the capital of America’s largest state. It should be welcoming with open arms those from outside Sacramento who work in the city and visitors from around the world.

“Instead, the city plans literally to add insult to injury,” said Sorich.

He noted that Sacramento, like most local governments, faces some tough economic challenges. But taxing out-of-town motorists – including the thousands of workers who commute into the city every day – is dreadfully wrong and unfair.

The ordinance anticipates contracting with a third-party billing company that will bill insurance companies. The ordinance’s scheme is based on the notion that insurance companies will pay the bill.

“But the fact is that auto insurance policies were never designed to cover these fees. Therefore, many accident victims will be forced to pay the tax out of their own pockets. The fees could be $2,000 or more. For insurers who pay the tax, it represents an increase in costs – which in turn could affect rates for all drivers.

“One sure thing in all of this is that the billing company that gets the city contract will always get paid first. The billing company takes its cut. Then it sends the rest of the payment to the city,” Sorich said.

ACIC’s president pointed out that the city envisions that the billing company will determine fault. Therefore, the decision of fault will be made by the same private company that profits from the tax.

“Drivers won’t get a fair shake,” said Sorich.

He added that the proposed ordinance is in effect double taxation. The emergency services are paid for with property taxes. Sacramento, as a result, will be double-dipping at the expense of motorists. For non-resident drivers who have accidents, its taxation without representation.

“The ordinance also could end up hurting and not helping the city. It anticipates additional revenue but fails to consider the amount of lost sales revenue when residents from surrounding areas and potential visitors decide to stay away to avoid being taxed for just being in an accident.

“The ordinance tells Californians – who come to work in Sacramento, who come to the city for recreation, shopping and entertainment and who come to Sacramento to visit their state capital – that they are second-class citizens,” said Sorich.

He noted it is reasonable to suggest that a sign be posted outside Sacramento warning visitors of the financial peril they face. It could read: “Warning, entering Sacramento, you outsiders could be taxed for being in an accident. Come back soon. We need the money.”


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