An Accident Waiting to Happen: New York City's "Crash Tax"

March 1, 2011

New York City is one of the latest municipalities to propose a "crash tax" to fund emergency services.  More aptly described as an emergency service user fee, motor vehicle collisions and vehicle fires would result in a charge ranging from $365 to $500.  It is still not clear who will ultimately be liable for the fee.  New York City is right to look for alternative revenue streams, but imposing a fee in emergencies is not the answer, says Peter Swanson, a Hatton W. Sumners Scholar at the National Center for Policy Analysis.

  • According to the Fire Department of New York's (FDNY) 2009 statistics, fire units responded to 473,024 alarms and FDNY ambulances made more than 1.3 million runs.
  • Ambulances responded to 848,957 nonemergency medical calls.
  • In many of these cases, there were alternative means of transportation.

This is significant because there is greater revenue loss in ambulance transportation because of the medical reimbursement formula, higher call volume and higher consumption of nonreusable goods.

  • If the FDNY responded to 36,500 car fires and car accidents per year (about 100 per day) and charged the maximum crash tax of $500 per call, the calls would generate revenues of approximately $18.25 million.
  • However, suppose a $50 user fee was applied only to the 848,957 nonemergency medical responses.
  • Even with a 50 percent collection rate the city would raise more than $21 million.
  • Additionally, if this fee reduced nonemergency calls by, say, 5 percent, based on national data from the Inspector General, it would generate approximately $6.5 million dollars in savings.

The current fiscal environment will force municipalities to look for alternative sources of revenue.  User fees show promise for additional sources of revenue, but are inappropriate for emergencies.  Ultimately there is a need for reform of tax funding and insurance reimbursement policies to address the long-term financial sustainability of emergency services, says Swanson. 

Source: Peter Swanson, "An Accident Waiting to Happen: New York City's 'Crash Tax,'" National Center for Policy Analysis, March 1, 2011.

For text:

http://www.ncpa.org/pub/ba741

 

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