Automakers aren’t against them selling direct, dealers are. And it’s illegal for automakers to do so because automakers tried to kill dealers earlier on and take over the sales channels dealers built out. Plus for communities, it’s more beneficial than they’re locally owned versus all of the money flowing out.
I don’t buy the idea that dealerships benefit communities. If they simply charged sales tax based on the address of the purchaser, it would be more equitable.
The current law creates local dealership monopolies, and the dealerships provide terrible service, and rip everyone off as a result. If you don’t like it, you have to drive dozens of miles to go to a competitor (and car purchases invariably involve multiple trips).
Cities want the sales tax revenue, so they give the dealerships huge tax breaks to attract them.
In Illinois and California, at least, the sales tax rate for cars is based on the purchaser's residence. I think though, that the bulk of the tax revenue goes to the location of the dealer (but I could be wrong). Purchasing out of state is generally discouraged by having the purchaser pay at least the difference in tax rates if the purchase was less than a specific time since the arrival of the car in state.
It might have changed, but I remember ads from dealers on just the LA side of the LA-San Bernardino county line advertising that sales tax was based on the purchaser's address. That was still the case in 2014 according to the L.A. Times [1]:
>There’s no advantage, in terms of sales tax, on where you go to buy a car. An Orange County resident who buys a car in Santa Monica will stay pay the Orange County sales tax rate. The sales tax rate is charged based on where the car will be registered.
I suspect that the Car and Driver article was poorly researched and factually incorrect.
It's a hell of a stretch to call a built environment with a car dealership in it a "community." These things are blighted dead space, and they belong out of the way.
I don’t buy the idea that dealerships benefit communities.
It's a method of spreading the wealth. The model increases the number of people employed and businesses involved, both directly and indirectly, exponentially.
You're not wrong, but there are far better ways to redistribute wealth than mandating the use of rent-seeking middlemen. Why not levy a tax directly and cut out the middle man?
Because the step past that of using the tax to redistribute is politically infeasible. It's like "Why not get rid of tipping and just give waiters a tax benefit?". Well, turns out we can't do the second piece so that's why we don't do the first piece.
If the purpose of dealership laws is redistribution then to get dealership laws you need enough public support for it to pass a law, in which case it might as well be the good law instead of the garbage one.
Moreover, this is exactly the sort of thing where the bad is the enemy of the good. If redistribution is good and cronyism is bad then allowing the cronyist redistribution law to pass not only placates the people who want redistribution (and so they fight less for the better one), it also inflames the good should-be-allies anti-cronyists and requires you to waste political capital on infighting.
Bad compromises are bad. Good law > nothing > bad law.
Usually when you do things like this, you package it in a defensible way. So maybe you decide you want some redistribution, but that's politically infeasible. Instead you package it as something else.
Another example is most big infrastructure projects in California. You'll notice that most don't finish in time. The real reason is to ensure that there is sustainable construction work going on. They're capable of finishing fast but no one wants that. They just want a large number of people employed. The Trojan Horse is "we're building infrastructure" because otherwise you have to fight the anti-redistribution anti-subsidy people.
That's because when a concession is made to people they rarely will fight to make it perfect in the name of perfect is the enemy of good enough. Anti-cronyists don't expend political effort because they don't have upper-level political support. It's not a thing anyone needs to worry about. Only people who want to get something concrete and people in danger of losing something concrete expend political effort.
> Usually when you do things like this, you package it in a defensible way. So maybe you decide you want some redistribution, but that's politically infeasible. Instead you package it as something else.
So do the same thing with the good solution. Make it a UBI but call it a negative income tax and tell everybody you're giving them a huge tax cut (which for the majority of people you actually are).
> Another example is most big infrastructure projects in California. You'll notice that most don't finish in time. The real reason is to ensure that there is sustainable construction work going on. They're capable of finishing fast but no one wants that. They just want a large number of people employed. The Trojan Horse is "we're building infrastructure" because otherwise you have to fight the anti-redistribution anti-subsidy people.
But that's the same thing. Instead of purposely delaying the construction, just finish it on time and then go back and say "look how inexpensive we can build things now, let's build all the things" and get a hundred more construction projects.
Blowing the budgets every time is how you get them all canceled by giving very inconvenient real evidence to the people who want to cut them out next time.
> Anti-cronyists don't expend political effort. It's not a thing anyone needs to worry about. Only people who want to get something concrete and people in danger of losing something concrete expend political effort.
All the cronyists and taxpayers are also anti-cronyists for everything but their own projects because everything else is competing for resources with them. A state can't pass a budget with a 500,000,000% deficit and expect anybody to buy the bonds, so every piece of garbage in the budget is crowding out the garbage that somebody else wants. The easier you make it to make the case against your thing, the more likely they are to get their garbage to replace yours.
> So do the same thing with the good solution. Make it a UBI but call it a negative income tax and tell everybody you're giving them a huge tax cut (which for the majority of people you actually are).
I think this might well be doable. I'm definitely on board with smooth social security over square-wave social security (what we have now).
> But that's the same thing. Instead of purposely delaying the construction, just finish it on time and then go back and say "look how inexpensive we can build things now, let's build all the things" and get a hundred more construction projects.
I'd say the origination costs angle kills this. There is high pressure to keep the tender process high-bureaucracy from all sides, so you can scale single projects into many dollars but you can't start many projects.
> I'd say the origination costs angle kills this. There is high pressure to keep the tender process high-bureaucracy from all sides, so you can scale single projects into many dollars but you can't start many projects.
That's the status quo. It sucks, therefore find a way to blow it up. Make it so that it doesn't work. Require the contractor to buy cost overrun insurance from an insurance company which obligates the insurance company to pay someone else to finish the entire job if the original contractor exceeds the budget by a penny, then let it be the insurance company's problem to figure out how to make the company come in on budget or contract the job out to someone else who can.
Once you blow up the bad thing (making construction projects exceed their budgets), the path of least resistance to more construction jobs becomes the good thing (many more construction projects that meet their budgets). But you have to blow up the bad thing first or it remains the status quo.
Sure, a step to setting foot on to the moon is to build a moon rocket, but it turns out the hard part is building the moon rocket. Methods exist today to incentivize speed and performance. It's not the lack of methods. What we don't have is a method to put the methods into practice.
Then shouldn't that be the problem everybody is working on? Forget about construction projects and car dealerships, would there be a huge objection into research funding for how to most effectively combat political corruption? Or a voting system change like range voting? [1]
* Information Asymmetries: I don't know anything about you or any other org working to combat this so I'm not comfortable spending money on you.
* Coordination Problems: Where do we act, on what scale, etc.
* Value Assignation Problems: How do I benefit from this for the effort I need to put in?
* Risk Problems: What is the chance of success solving a problem of this scale?
Essentially, I'm only seeking to explain. Personally, I have no problem with the system existing as it does. I would prefer other systems out of an inner desire for elegance. But I'm pretty proficient in acting within these to my own benefit so I won't tear it down. Perhaps part of the problem is getting folks like me to care to change this. I'm happy to cheer you on, though. Good luck!
It is inherently unequal though. Not every community gets a dealership, especially poor neighborhoods. But they do have car purchases. If sales were online, and sales tax distributed by purchaser addresses, the tax revenue would be much more broadly spread out.
Entertainingly, dealership owners are notoriously Republican-leaning. Perhaps they just need a bit of help staying true to their free-market ideals some times.
It depends whether you're talking about the politicians or the constituents. There are plenty of Republican voters with free-market ideals, because who else are they going to vote for? Bernie Sanders? But the politics is systemic corruption. To get elected, both parties have to raise money from somebody, and not a lot of those "donors" are buying politicians because they want fairness and free market competition.
It would be more beneficial for communities to not pay the "dealer tax". Why do we need to support a group of people whose job can largely be done by an app these days?
Having bought several Tesla vehicles from Tesla, all requiring back and forths with local service due to manufacturing issues, their process leaves much to be desired (both purchase and servicing). “Largely done by an app” is not an accurate representation of the problem space.
I've had two service items with my Tesla, and each left me very unsatisfied because I had very basic and quick questions that the app would not answer (e.g. how long is this expected to take?) but there was no way that I could talk to a human at Tesla. They have optimized their system to prevent any human to human contact unless it's in store.
However, as bad as that experience was, it was faaaaaaaar better than any dealership interaction I've every had. I would never go back, even though I disliked the Tesla experience.
Even if Tesla wasn't an electric car, I'd be tempted to use them just to avoid the dealership experience.
So that's a justification for the "dealer tax"? That the process is not "largely done by an app"?
Seems to me that if the process cannot be streamlined by an app, that the process is wrong. Growing pains for this industry, I get it. But it shouldn't really be any harder than what an 'app' can provide. Give me a few model options, click 'Buy'.
I’m not saying the dealer tax is warranted (absolutely not), I’m saying it’s still a lot of human effort even if you streamline the process with an app (financing, tax, title, licensing, vehicle defect issues, etc). Tesla totally botched my first Model S purchase and I was stuck for two days out of state while they fixed my purchase contract and my financing. This was after having bought through their website.
Just as high touch enterprise sales is here to stay, so is a human in the loop for auto purchases. You are not the average consumer if you’re here. Your average consumer will not tolerate rough edges of an app when spending $37k.
> Your average consumer will not tolerate rough edges of an app when spending $37k.
But that's the process problem. If you go to the website and click "buy" and the car shows up in perfect condition exactly to your specifications then there is nothing to need a human to interact with. And if they can get it to the point where that's what happens 99.99% of the time, having to send out a human representative the other 0.01% of the time is cost effective.
Only net profit to the owner flows out of the community. The money going to employees at the branch/showroom (which would still be retained, as they serve a purpose regardless of who runs them) is still retained in the community. Given how many auto dealerships are franchises owned by out-of-town individuals or groups, it’s already the case anyway.
