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Study Finds Traffic Ticket Debt Hits Poor Hardest
Economic analysis of 3.7 million Florida traffic tickets reveals a disproportionately negative impact on low-income motorists.

Steven Mello
The impact of traffic tickets on motorists who are struggling economically can be devastating, according to a recent study by an economics researcher at Princeton University. Steven Mello, who is finalizing his doctorate in economics, conducted an analysis of the impact of traffic tickets on Florida drivers using individual credit report data with payrolls to calculate the impact of a citation.

From 2011 to 2015, about 4.5 million Florida drivers received a traffic citation, amounting to nearly a third of the driving age population. Demographic data show more tickets are issued in low-income areas, and in these areas each ticket carries a heavier financial impact. The average ticket was estimated to cost $175 plus roughly $120 a year from the cost of higher insurance. Mello was able to pull anonymized credit report data for 3.7 million of Florida's traffic ticket recipients.

"The empirical analysis reveals that following the receipt of a traffic fine, individuals fare worse than would otherwise be predicted on a host of credit report outcomes," Mello wrote. "Citations increase unpaid bills, delinquencies, and adverse financial events, with the increases most pronounced for the poorest quartile of drivers."

The analysis found that the average-income drivers struggled as expected from a $285 loss of income from the cost of the ticket itself, plus the cost of insurance points. The poorest drivers were hit much harder by the equivalent of a five percent reduction in their income. The study found evidence in credit reports that after a traffic stop, borrowing declined perhaps as access to credit was affected.

To well off motorists, the fines are little more than a nuisance. For others less well off, they can push drivers into a poverty trap.

"The findings offer several important takeaways," Mello wrote. "First, consistent with a growing literature documenting widespread financial fragility among US households, the results imply that many individuals are not insured against even small financial shocks. When faced with a $175 traffic fine, individuals accrue collections and delinquencies on their credit reports, suggesting an inability to cover the unexpected expense."

The study suggested that traffic fines -- most commonly for speeding -- may ultimately be counterproductive.

"A conservative estimate of the welfare loss associated with the average traffic ticket is more than two times the size of the revenue raised, suggesting that policies to reduce citations with low public safety benefits could be welfare enhancing," Mello concluded.

A copy of the study is available in a 800k PDF file at the source link below.

Source: PDF File Fines, Fees and Financial Wellbeing (Steven Mello, 11/14/2018)

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