Of Fees and Taxes
On Friday I read this article in the NY Times, “Cities turn to fees to fill budget gaps.”
At first read, the thought of an accident response fee was horrifying. I honestly imagined injured motorists, who had in the past refused to pay their response fee, being let alone to hobble off to a hospital after a highway accident, with broken bones sticking out of their skin, because they were on the city’s list of defaulters. Then I realized that’s pretty unrealistic. City safety services (fire, police, etc.) have a pretty serious obligation to respond to situations in which public safety is affected. If you’re cut and bleeding, an ambulance will probably show up whether you want it to or not. These response fees are probably not going to jeopardize public safety.
The woman interviewed in this article said that her $316 response fee wasn’t fair. Is it fair to make someone pay for a police response to a collision when, by law, you must call the police when damages exceed some specified amount? I haven’t been able to come to a conclusion on that.
The article implied that the fee would be charged to the party at fault. So the most simple response to her “No fair!” cry is that maybe she should have made more of an effort to avoid crashing her car. However, don’t we already have enough incentives not to crash our cars? You can already be fined for speeding or reckless driving, plus your car insurance is adversely affected by accidents, and you usually have to pay something to fix the damage to your car. Not to mention the prospect of serious bodily harm. I’m not sure a city could play the accident prevention angle when defending an accident response fee. It seems like the only actual reason for the existence of these fees is to increase local government revenue. I mean, it doesn’t seem to serve a dual purpose.
According to the article, “Politicians tend to regard fees as more palatable than taxes, and more focused too. If a state needs to finance an infrastructure to oversee fishing, why shouldn’t fishermen foot the bill? But groups like the nonpartisan Tax Foundation in Washington worry that governments are now using fees to shore up budget shortfalls rather than cover specific costs incurred by specific users.”
Who can say that the money from accident response fees is actually paying for that kitty-litter stuff firemen use to clean up blood and oil? Would citizens see this as more fair if they received an itemized response fee?
More generally, are response fees and other fees more effective or efficient than everyone paying more taxes overall? What do these methods of collecting revenue do to community and individual indifference curves? Could you graphically explain preferences for fees versus taxes? This article raised an incredible number of questions in my mind, and I am hoping to discuss some of them in class next week.
