Bipartisan Coalition Rejects Costly Tax Proposal in FY 2016 Budget
President's budget would hinder business and consumer access to affordable insurance
WASHINGTON, Feb. 2, 2015 /PRNewswire-USNewswire/ -- The Coalition for Competitive Insurance Rates (CCIR), the leading voice for continued and increased competition within the insurance industry, today roundly objected to a discriminatory proposal in President Obama's FY 2016 budget that would deny a tax deduction for certain reinsurance premiums paid to foreign-based affiliates by domestic insurers. This marks the sixth year in which the president has introduced this specific budget recommendation, despite his failure to gain support for the proposal in previous sessions.
The measure, which closely resembles legislation (H.R. 2054 and S. 991) proposed in the 113th Congress by Reps. Richard Neal (D-MA) and Bill Pascrell (D-NJ) and Sen. Robert Menendez (D-NJ), seeks to impose an unnecessary tariff on the reinsurance companies responsible for maintaining affordable business and consumer access to insurance by spreading risks globally. In a letter sent today from the Coalition for Competitive Insurance Rates (CCIR) to the chairmen and ranking members of the US Senate Finance and House Ways and Means Committees, 31 concerned insurers, business, industry and consumer groups expressed strong trepidation over the unintended consequences of such proposals.
"These reinsurance tax schemes reflect the insular views of a select few who have committed themselves to hounding an industry that is vital to handling disaster recovery more effectively," said Pete Sepp, president of the National Taxpayers Union, a signatory on the CCIR letter. "President Obama should listen to American taxpayers who cannot afford, and rightfully do not want to shoulder, the financial burden of misguided policy."
A growing chorus of state and federal officials from across the political spectrum has vocally opposed the predatory reinsurance tax proposals. State insurance commissioners representing Florida, Georgia, Louisiana, Mississippi, Nevada, North Carolina, Pennsylvania and South Carolina have publicly criticized the measures, as have agriculture commissioners from Florida, North Carolina and Tennessee, and Florida Governor Rick Scott. Commercial and industry groups ranging from the Louisiana Home Builders Association to the Associated Industries of Florida to the Texas Association of Business have also expressed public opposition.
"Proposals to institute a tax on foreign affiliate reinsurance will result in a more limited U.S. domestic insurance capacity and more expensive insurance coverage for all Americans, particularly in states like Louisiana that are prone to natural disasters," said Stephen Waguespack, president of the Louisiana Association of Business and Industry in a letter sent to Rep. Charles Boustany (R-LA) on November 20, 2014. "Our member businesses, especially along the coast, already face challenges over the availability and affordability of property and casualty insurance."
Gulf Coast states including Louisiana, whose residents remain keenly aware of the disaster wrought by Hurricanes Katrina, Isaac, Gustav and others, would be disproportionately targeted by President Obama's budget proposal and similar legislation. According to an economic impact study conducted by the Brattle Group of a previous variant of the legislation introduced by Rep. Neal and Sen. Menendez, Louisiana business owners' Commercial Multi-Peril Insurance would increase by 5.5 percent, or $28 million per year. Similarly, families would be subjected to a 1.4 percent increase in Homeowners Multi-Peril Insurance, totaling $21 million annually.
Florida, which remains among the most likely states in the country to be afflicted by hurricane damage, would be no less impacted by the proposals. Brattle estimates that Commercial Multi-Peril Insurance would experience a towering 12.6 percent increase costing $264 million per year, while Homeowners Multi-Peril insurance would increase by 4.2 percent, resulting in $266 million in added expenses for families.
In a letter to Rep. Vern Buchanan (R-FL) on October 13, 2014, David A. Hart, executive vice president of the Florida Chamber of Commerce, wrote, "Global insurance companies provide nearly two-thirds of all reinsurance throughout the country, including a considerable share of the home and business property insurance in Florida. Therefore, it is bad business to propose a tax on foreign affiliate reinsurance, which would result in limiting U.S. insurance capacity and driving up the cost of insurance for all Floridians."
The Coalition for Competitive Insurance Rates is made up of business organizations, consumer advocacy groups, insurers and their associations. For more information on CCIR, please visit www.keepinsurancecompetitive.com.
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SOURCE The Coalition for Competitive Insurance Rates
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