California Governor To Propose Homeowners, Business Property Insurance Policy Tax

January 10, 2008

California Gov. Arnold Schwarzenegger is expected to propose a 1.25 percent tax on homeowners and business property insurance policies when he unveils his state budget today.

"The expected proposal will unfairly force California consumers to fill Sacramento's budget gap, while letting Schwarzenegger's insurance company donors escape any burden," according to The Foundation for Taxpayer and Consumer Rights. The consumer advocacy organization said the tax on policyholders should be rejected by lawmakers and the Insurance Commissioner.

"The Governor's attempt to add an insurance tax on consumers while letting insurance companies off the hook smacks of special interest favoritism and will raise insurance premiums for California homeowners and businesses," said Doug Heller, executive director for the FTCR. "Shared responsibility does not mean making average Californians pay while the Governor's insurance company donors just deliver the check to Sacramento."

The Governor's office indicated a portion of the policyholder tax would fund certain regional firefighting needs.

However, FTCR argued that while insurance customers around the state will be forced to pickup the tab for those efforts, insurance companies will presumably reap the financial benefit, through fewer claims and lower wildfire payouts. "If insurance companies are going to save money as a result of this program, they should be responsible for paying the tax," the advocates said in a statement.

FTCR said insurance companies have contributed $3.8 million to the Governor's campaigns.

Sources: FTCR, Office of the Governor