Gov. Patrick announces new Auto Buying Initiative

April 1, 2010

(BOSTON) - Gov. Deval Patrick, citing the rising cost of automobile ownership in the Bay State, has announced a new program to allow "every working family access to a brand new vehicle at a reasonable cost."

Citing his recent decision last February 11 to cap rising health insurance premiums for small business, Patrick said this is the next logical step. "Getting to work is a right that every working family has. And we need to get our citizens back to work. If having a new car is necessary to achieve that goal, then I'm all for it."

At a news conference outside his statehouse office, Patrick promised that "tens of thousands of mobility-impaired citizens" will be able to purchase a new vehicle under his program. He directed his transportation czar to oversee the program to make sure that everyone is covered. "This won't be easy, but it is necessary if all of our citizens are going to participate in the coming economic recovery," he said. "If you can't drive to work, you can't hold a job. And if you can't hold a job, you can't pay taxes. And we all know that the state needs more tax revenue."

The plan as outlined by the Governor is simple. He has declared that car dealers cap the selling price of vehicles at $5,000 for those buyers with income under $50,000 per year. Dealers would face stiff penalties if they do not comply with the new regulations, including confiscation of their inventory or even jail time. "We are serious about this," he said.

When asked how dealers could afford to do this, Patrick was somewhat vague. "Maybe they can charge more to couples earning over $250,000 per year to make up the difference," Patrick said. "I"m not sure what other options they have, but these double-digit increases in new vehicle cost every year are simply driving people out of the marketplace," said Patrick. "Excuse my pun," he added.

Patrick did express concern about the other costs that drivers face. "You have city and town excise taxes, you have sales taxes, you have the cost of maintenance and repair, you have the cost of fuel and fuel taxes. You even have tolls. We will be looking at all of those costs and expenses to see if we can reduce the burden further for struggling families," Patrick said. "What is not negotiable is making sure that everyone has access to private transportation."

Michael Widmer of the Mass. Taxpayers Foundation offered some encouragement for Patrick's plan. "We all know that the cost of transportation is going through the roof, and this is certainly one way to keep things affordable for some of our residents who have been priced out of the market," he said. "Although we don't support taxing the rich more to support this program, something needs to be done and this is a step in the right direction. Frankly, we don't see that Patrick has much choice if he wants to solve this problem."

Barbara Anderson of Citizens for Limited Taxation was against the proposal. "This is exactly what they did to the health insurance industry, basically telling private companies they had to fund wealth transfer payments. This is a terrible step to take, but it is not surprising based on Gov. Patrick's similar move with the private health insurance industry last February." Anderson cited Patrick's regulation that health insurance costs be limited to 3%, which was welcomed by small business owners but attacked by the industry.

See related story in the Boston Herald, Feb. 11, 2010:

When asked to comment on Anderson's criticism of his new initiative, Patrick said "Barbara who?" He also said that he expects the auto industry to criticize his move, "but they had their chance to control price increases and they didn't. Now this has become a public economic safety emergency."

Under Patrick's plan, auto dealers would be forced to limit what they charge to customers with family incomes lower than the statewide median income. Car buyers would fill out an application for a reduced price, and include a copy of a recent pay stub.

When asked whether this verification process was subject to misuse or fraud, Patrick dismissed such concerns. "Committing fraud is illegal and we have plenty of laws on the books to protect us against that."

Several car dealers contacted to comment refused to do so, citing concerns about retribution. "All of our elected officials are Democrats, so if I speak out against this, I may be targeted. I can't afford to talk," said Steven Seymour, a car dealer in Acton, MA. "If you quote me, please don't use my name or town," said Seymour, who lives in Sudbury.

Other dealers expressed deep concern. "My margins are so low right now that I can't afford to reduce the price of vehicles I sell. I will lose a lot of money at $5,000 per car. I'll be out of business in less than a week at that rate," said one dealer. "I'll have to find a way to avoid dealing with poor people."

But Patrick warned against dealers discriminating against low-income customers. "We have laws to deal with discrimination," said Patrick. "And we won't hesitate to use them," Patrick said. "These greedy auto executives must be stopped."

Patrick's plan doesn't leave out moderate-income families. Under the Patrick plan, families earning between $50,000 and $100,000 a year would be charged no more than $10,000 for a new vehicle. Families earning $100,000 - $150,000 would be charged no more than $12,500, and families in the $150,000 - $200,000 bracket would pay no more than $15,000.

"That represents the vast majority of voters by my calculation," Patrick said.

Patrick said not to give up on the free market, however. "Dealers will still be free to recoup their costs and earn their profit on high-income individuals. If a customer makes over $250,000, the sky is the limit on what they can be charged," Patrick said. "I'm a big fan of free enterprise. Let the free market determine the prices."

"And if your family makes more than $250,000, don't even think about going out of state to purchase your vehicle," Patrick stated. "We will require high-earning families to provide copies of their automobile purchase agreement, and there will be an additional 'use tax' payable to the state if individuals try to circumvent the system and purchase their car outside of the Commonwealth," Patrick said. "I hadn't planned to announce this today, but this will be our pilot program to recoup lost sales tax revenue for Mass. residents who go to New Hampshire to purchase items and avoid the Mass. sales tax. We will have vehicle transponders on every road leaving the state to keep track of these tax cheats."

But Patrick didn't want to get sidetracked. "Let's keep focused on making things affordable for working people and keeping costs down," he said. "The best way to control rising prices is to cap them. And if I can do it with health insurance costs, why not look at each sector of the economy and start to fix these problems where we can find them?"