“Roundup the usual suspects;” here we go again. No, it’s not an unsolved murder in wartime Casablanca, simply the latest skirmish in the ongoing dispute over whether companies that write reinsurance in the U.S. market are using tax havens to avoid paying a fair share of the taxes they would otherwise owe on the premiums they earn.
A proposal in President Barack Obama’s FY 2014 budget seeks to deny a tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers. The proposal closely resembles legislation introduced in previous Congresses by US Representative Richard Neal (D-MA) and Senator Robert Menendez (D-NJ) that would drastically raise insurance rates across the country. The President’s budget proposal and the Neal-Menendez legislation would impose an unnecessary and costly tariff on the companies that help spread insurance risks globally. This ability to spread risk has been especially beneficial for consumers and businesses in areas subject to hurricanes, earthquakes, crop failures and other forms of disaster.
More than 100 independent experts, state government officials, business owners, and associations have publicly filed opposition letters to these tax proposals. Additionally, the Brattle Group, an economic research firm, has published a study pointing out the potential economic consequences of the Neal-Menendez legislation.