There is a growing exodus of people moving from high tax states to low tax states. One reason is that states with large budgets are trying to find ways to sneak new taxes into the bills of state residents. A current bill pending in New York state is a case study in bad policy that ends up hurting a state in the long run with high taxes and people voting with their feet.
New York hasn’t secured its place among the top states for outmigration only because of its first-in-the-nation combined tax burden. The Vampire State, as it has become well-known, hits its residents in the wallet in more ways than one. It may be getting ready to do it again.
Last month, the New York State Senate Transportation Committee passed S5085A, a bill that, if enacted, would increase the cost of car ownership for all New Yorkers.
With the Albany legislative session reaching a fever pitch, car dealerships are not giving up on pushing for this legislation. If the legislature fails to stop this bill, the Governor should swiftly veto it again, as she did last year. Consumers should be outraged by the brazen efforts of car dealerships and Albany legislators who are prioritizing sky-high profits over affordable car ownership for New Yorkers.
At its core, the bill seeks to revise the current system under which auto warranty repairs are compensated. This would be a boon to dealers and a blow to consumers.
Under existing arrangements, many car manufacturers engage in discounted fee agreements with dealerships, a practice akin to health insurance companies and their 'in-network' health practitioners. The rationale is straightforward: warranty repairs are a guaranteed volume business, allowing for such negotiations on the front-end.
However, with this bill, dealers would shift the dynamic, aiming to charge auto companies the same rates as they do for non-warranty customers. In short, the dealers want to be paid more.
Imagine if your dentist wanted to get around the negotiated pricing arrangements with your dental insurance company?
While this scheme might initially seem equitable, it could come with significant disadvantages for consumers issues of transparency as well as higher warranty and service prices.
Albany’s regulations, driven by industry lobbyists, seldom benefit the average consumer. While the bill smartly includes a verification mechanism designed to prevent auto companies from being overcharged by dealers. This mechanism requires dealers to submit records of non-warranty service charges to justify their pricing structure for warranty services. However, this could lead to a significant increase in the costs of common warranty repairs, such as headlamp replacements or EV battery replacements, as dealers align these costs with the typically higher non-warranty service rates.
The opacity of dealer service centers exacerbates this issue. Price transparency is notoriously lacking in this sector, making it challenging for consumers to anticipate or compare costs. Proponents of S5085A seem to disregard the potential for this legislation to set a minimum threshold for repair prices, with no upper limit, creating a scenario where dealers have the incentive to continually escalate charges.
This upward spiral of costs would primarily benefit the dealers, enabling them to levy higher charges on major auto companies like BMW, Ford, and Toyota.
This legislative push isn't isolated to New York. In 2021, proponents started in a handful of states and have grown since. Last year saw nearly two dozen such proposals across the country. Most were rejected by legislatures. In some cases, governors, and state attorneys general—the vanguard of consumer protection—weighed in proactively to steer these proposals to the shoulder.
As S5085A careens towards a full Senate vote, the car dealership owners are hoping they will have the state’s blessing to hike prices. The bill stands to create an economic burden on New York's car owners, setting a worrying precedent for consumer protection and market fairness.
This legislation would hit downstate commuters in particular. The bill, coupled with the new congestion pricing plan affecting New York City, would only compound financial burdens on motorists. Facing the prospect of both increased tolls and inflated repair charges, individuals and families relying on personal vehicles for transportation would again feel another one of the thousand financial cuts that has come to define living in New York.
Albany’s responsibility is to keep prices and costs down, not do the bidding of car dealers – or any industry – that wants to drive more regulation without appreciation for the public’s ability to pay for it.
While proponents of S5085A argue for fairness and equitable compensation, the reality of its impact contradicts these claims. Instead, the bill threatens to further inflate the costs of car ownership for millions of ordinary New Yorkers already struggling to make ends meet. If the legislature advances this measure once more and Governor Hochul fails to veto it, the few dealers who benefit will be outweighed by the motorists who will have one more incentive to head for the exit.
Tom Basile served as Executive Director of the NYS Republican Party from 2009-2011.
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