American businesses and consumers rely on the availability of insurance services provided at competitive rates. The Coalition for Competitive Insurance Rates is made up of business organizations, consumer advocacy groups, insurers and their associations advocating for continued and increased competition within the insurance industry.

 

 

A proposal in President Barack Obama’s FY 2017 budget seeks to deny a tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers. The proposal closely resembles legislation introduced in Congresses by US Representatives Richard Neal (D-MA) and Bill Pascrell (D-NJ) and Senator Robert Menendez (D-NJ) that would drastically raise insurance rates across the country. The President’s budget proposal and the Neal-Pascrell-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, two economic research firms, the Tax Foundation and the Brattle Group, have published independent studies pointing out the potential economic consequences of the proposals.

 

 


Tuesday
Feb092016

FY 2017 Budget Provision to Tax Foreign Insurers Opposed by Bipartisan Coalition 

President’s budget would reduce competition and consumer access to affordable insurance

Washington, DC (February 9, 2016) -- The Coalition for Competitive Insurance Rates (CCIR), the leading voice for continued and increased competition within the insurance industry, today condemned an inequitable provision in President Obama’s FY 2017 budget that would deny a routine business tax deduction for certain reinsurance premiums paid to foreign-based affiliates by domestic insurers. This is the seventh attempt by the president to introduce this specific budget recommendation, despite fervent opposition to the proposal in previous sessions.

“These reinsurance tax schemes are writ large attempts at special interest protectionism,” said top economist Arthur Laffer, who in 2015 published a study, "Do We Want Special Interest Trade Protectionism in the Tax Code?," that warns that what amounts to a reinsurance tariff would result in a capital reduction of nearly $10 billion, as well as a further drop in GDP due to foreign trade retaliation. “Denying this standard business expense deduction will push firms out of the marketplace, reducing coverage and increasing costs for consumers.”

President Obama’s budget 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), would result in a tax increase  on reinsurance companies responsible for maintaining affordable business and consumer access to insurance by spreading risks globally. This proposal has remained under active consideration in Congress, having been included in former Ways and Means Committee Chairman Dave Camp’s (R-MI) tax reform legislation (H.R. 1) in 2014; but it was not proposed by the Senate Finance Committee’s International Tax Reform Working Group in 2015.

In a letter sent today from 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 anxiety over the unintended probable consequences of such proposals.

“A tax on foreign affiliate reinsurance will stifle the reinsurance industry and drastically reduce competition in the marketplace,” said Tom Feeney, president and CEO of Associated Industries of Florida, a signatory of the CCIR letter. “Limiting U.S. domestic insurance capacity will drive up costs, placing a huge burden on homeowners and businesses. This tax would benefit few at the expense of many, including home owners, insurance companies and small business owners.”

A growing chorus of state and federal officials from across the political spectrum has vocally opposed the reinsurance tax proposals. Current and former 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.

A 2015 report issued by the Tax Foundation on the consequences of a tax on the foreign reinsurance industry found that United States’ GDP would experience $1.35 billion in losses over the long term, which is approximately twice the revenue it would collect. In an economic impact study of previously introduced related legislation by Rep. Neal and Sen. Menendez, the Brattle Group, a leading economic consulting firm, found such legislation would have reduced the net supply of reinsurance in the US by 20 percent, forcing American consumers to have paid a total of $11 to $13 billion a year more for their same coverage.

As the Laffer study concludes, “Good tax reform promotes a tax code with the lowest possible tax rate on the broadest possible tax base. Instead, the Obama/Menendez/Neal proposal to eliminate the deduction for foreign reinsurance premiums follows the exact opposite path, applying a high tax rate to a very narrow tax base – a targeted and specific industry. The known result—surely accompanied by a number of unanticipated consequences as well—will be that domestic insurers use less foreign affiliate reinsurance, which will result in less tax revenue than expected and more expensive, less effective insurance.”

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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.

Media Contact:  
Emily Flynn Pappas  
Podesta Group  
202-448-5208  
epappas@podestagroup.com

 

Thursday
Jul092015

Senate Working Group Unveils Int'l Tax Report; Bipartisan Coalition Calls Failure to Dismiss Protectionist Measure Disappointing

The Senate Finance Committee's International Tax Reform Working Group, led by committee co-chairs Sen. Rob Portman (R-OH) and Sen. Charles Schumer (D-NY), this week published a final report concluding that the committee will “consider both sides’ arguments moving forward” in its treatment of foreign affiliate insurance. The Coalition for Competitive Insurance Rates (CCIR), a bipartisan insurance consumer coalition, responded with disappointed over the committee’s failure to dismiss existing protectionist measures as it relates to foreign reinsurers, but expressed cautious optimism that the possibility still exists for a more affirmative stance to be taken.

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Friday
Jun192015

Top Economic, Industry Experts Agree: Protecting Consumers from Punitive Reinsurance Tax Makes Sense

Leading economists and industry experts convened on Capitol Hill Thursday for a panel discussion on corporate tax reform, specifically as it relates to how Congress should approach international affiliate reinsurance purchases.

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Monday
Jun152015

Op-Ed: Pro-growth tax reform, yes; discriminatory taxes, never

Famed economist Dr. Arthur Laffer this week penned an op-ed in The Hill advocating for pro-growth tax reform, particularly as it relates to protecting reinsurers from costly trade protections that would decrease availability and levy additional costs onto consumers.

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Wednesday
Jun102015

Op-Ed: Change the Tune on Taxes

In a US News & World Report column, National Taxpayers Union President Pete Sepp details lawmakers' often convoluted and conflicting approach to tax reform, warning that a "taxing obsession" remains pervasive in existing proposals. Sepp writes that plans to tax foreign affiliate reinsurance activities, for example, would have considerable unintended consequences for the private sector, as confirmed in a recent study by famed economist Arthur Laffer.

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