Guess Who’s Stealing Your State’s Tax Dollars.

June 30, 2004 by
Filed under: Uncategorized 

As I wrote last month, the Auto Body Association of Connecticut (ABAC) met with Connecticut Attorney General Richard Blumenthal. I was asked by the association to come up with some questions to give to the AG prior to our meeting so he could prepare some answers. One of the questions had to do with the insurance industry illegally manipulating labor rates. For an example I listed the labor rate for mechanical repairs in our dealer?s service department. I also came up with a detailed example of how much money this artificially low body shop labor rate is costing our state in tax revenue.

When I passed around copies of these questions and the supporting documents I was amazed at the response I received about my detailed example showing how much money our low labor rates are costing our state. It was a real eye opener, and it gave everyone a new perspective at the true cost of the insurance industry?s mafia like tactics. Not only is it costing repair shop owners millions, it costing every person in the state millions. And Connecticut is a tiny state with a small economy. Imagine what the effect, nationally, is.

I?m about to break it all down for everyone. I really hope shop owners across the country will apply numbers from their respective states? economies to come up with their own lost tax revenue examples. Plug in the numbers, print out the details and distribute the results to shops across your state. Make sure every legislator in your state gets a copy. Maybe even send a copy to the media. You know how much politicians love additional tax revenue. If they find out just how much money the insurance industry is stealing from their over-stuffed piggy banks every year, they may just do something about it. Maybe they?ll pass more laws that state insurance departments can ignore.

OK, according to the ABAC there are about 700 collision repair shops in Connecticut. Considering there are some very large shops and many small shops, let?s say that the average shop sells about 1000 repair hours per month, or about 12,000 per year. The average labor rate insurance companies are willing to pay is about $45. The average mechanical repair labor rate customers in the free market place are willing to pay is $75. That leaves a $30 per hour difference Connecticut collision repairers are being screwed out of for every hour they produce. Let?s do the math.

700 shops X 12,000 labor hours X the $30 per hour we are not getting to do a more difficult job, with much more expensive equipment costs = 252 million dollars in lost revenue to collision repair shops every year.

Connecticut has a 6% sales tax on labor dollars. Multiply that by the 252 million and we get $15,120,000 the insurance industry is stealing from Connecticut?s general tax fund every year. But it doesn?t end there.

That 252 million could be distributed as additional income to collision repair shop owners and their employees. The additional income would be subject to federal and state income taxes. Connecticut employees pay an average of 4% state income taxes. That?s another 10 million dollars lost to Connecticut?s general fund.
With a federal income tax averaging about 30% for the few people in this country who actually pay income taxes, 75.6 million dollars are lost from federal tax coffers. But, again, it doesn?t end there.

After paying state and federal income taxes Connecticut?s collision repairers would have 166.4 million dollars to spend and put back into Connecticut?s economy. This 166.4 million would be subjected to Connecticut sales tax again, which could generate another 10 million for our general tax fund.

Add all those lost tax dollars up and we?ve got $110,720,000 in taxes that insurance industry market manipulation is costing our state and federal governments in one year. Just think of all those feel-good social programs that could be funded with this money! All you Democrats out there should be drooling over this money. It?s all there for the taking if you can wrench it out of the dirty fingers of the insurance industry.

Now to put this into perspective, let?s take a look at how the insurance industry did last year. According to ConsumerWatchDog.org and InsuranceNewsNet.com the insurance industry?s property/casualty profits for 2003 were 1000% higher than 2002. They raked in almost $30 billion, that?s billion with a ?B,? in 2003. If the 252 million we lost to them this year in Connecticut seems like a lot of money, consider this. That 252 million is just .009% of their nearly $30 billion profit. This year, if their current earnings remain constant they will hit $40 billion. Don?t you think they can afford to pay a fair labor rate?

Hey, I?m not blaming the insurance industry. I know it sounds like it, but I don?t blame them. They are doing what we should be doing, making profits. They are doing it very successfully. Why aren?t we? Here?s your chance to make a difference. There are plenty of laws already on the books to prevent insurance companies from pulling their dirty little tricks. All you need to do is convince the proper authorities in your state to enforce those laws. Maybe once your greedy politicians get their grubby little hands on the tax loss document, that you are so diligently going to produce from what you?ve learned in this rant, they will pressure your insurance department to stand up to the insurance industry.

Then again, maybe they?ll just pass some more laws that will never be enforced. I guess it’s up to you.

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Comments

2 Comments on Guess Who’s Stealing Your State’s Tax Dollars.

  1. DONATIONS on Wed, 30th Jun 2004 2:07 pm
  2. INSURANCE COMPANIES DONATE BIG BUCKS TO RE-ELECTION COFFERS. SO
    JUST HOW MUCH WOULD THEY PUSH FOR
    CHANGE?

  3. Dennis on Mon, 12th Jul 2004 1:23 pm
  4. Its not the labor rate that bothers me its the funny time we have to use to get paid what is needed i dont think an appraiser in mass knows what it takes to repair a panel but they do know its a lot less than they have to wright in order to get an agreed price
    funny time is bad for us all and sets bad practices

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