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Do Rate Caps Bring the Desired Affect?

Dons.article 54e0fBy Don Archer

As a measure intended to do away with unscrupulous towers and exorbitant rates, many city governments enforce a maximum amount per tow, believing that if you take the money out of the towing business you'll only get honest, respectable businessmen doing the work.

Of course, you can't blame people for wanting to pay less.

The reality is, controlling costs has been tried before and it doesn't work. You need look no further than healthcare for an example.

"Forbes" contributor Chris Conover wrote an article in 2012 that explains exactly how attempting to control healthcare costs has had the opposite effect.

In his article he writes that, "In 1958, per capita health expenditures were $134. This may seem astonishingly small, but it actually includes everything, inclusive of care paid for by government or private health insurers. A worker earning the average wage in 1958 ($1.98) would have had to work 118 hours—nearly 15 days—to cover this expense."

In 1965 Medicare was established as a measure to control healthcare costs for seniors. Conover wrote, "By 2012, per capita health spending had climbed to $8,953.00. At the average wage, a typical worker would have to work 467 hours—about 58 days."

Conover's not just talking about inflation. The price of everything has gone up since 1958. He's using today's average wages compared with 1958's average wages to show that the price of healthcare is up by almost 400 percent, precisely due to measures aimed at controlling costs.

Some suggest that healthcare was an easy mark. And that the government became so deeply involved precisely because of its desire to widen its scope and power while increasing the dependency of the populace upon government.

Maybe that's why other city leaders are taking a different approach with towing rates. They're taking a play out of the federal government's handbook.

Rather than limiting the amount of money a tower can charge, many cities like Bridgeport, Conn., are bidding out towing services. Instead of looking at towers as a problem that needs fixing, they're taking advantage of this "common villain" and using them to collect tax dollars, somewhat covertly.

In 2013, Jim Arillo, of Jim's Auto, agreed to pay the city of Bridgeport $376 per car to win the city's towing contract. Separately the city takes in $1.5 million annually from their boot program.

In cities like Bridgeport, high "pay-to-play" rates have forced towers to raise towing fees. But in other places, the authorities have clamped down tight on the amount a tower is allowed to charge, forcing them to raise rates elsewhere.

If the desired effect of rate caps is to decrease the burden on the public, they don't seem to work. Maybe the question we should be asking is do government controls work?

Note: This article originally appeared in the July 8, 2015 edition of Tow Industry Week.

American Towman Field Editor-Midwest Don G. Archer is also a multi-published author, educator and speaker helping others to build and start successful towing businesses around the country at TheTowAcademy.com. Don and his wife, Brenda, formerly owned and operated Broadway Wrecker in Jefferson City, Mo. E-mail him direct at don@thetowacademy.com.
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