Florida lawmakers are moving forward with a proposal to eliminate a 15 percent premium tax credit for insurance companies in order to reduce automobile license fees despite strong objections from insurance industry.
The Florida Senate Appropriations Committee by a unanimous vote approved the proposal (SB 7132), which would repeal a 27-year old premium tax credit that allowed insurance companies to reduce their tax by up to 15 percent of the salaries paid to employees located in the state. The definition of employees excludes insurance agents.
Lawmakers want to use the tax money to reduce a large hike in automobile licensing and registration fees enacted in 2009. The committee staff estimated the repeal of the tax credit would increase revenues to the state by at least $220 million annually.
That money would all but cover the $225 million annual reduction in state funds due to the decrease in motor vehicle fees, which translates into a $12 savings per driver.
The proposal caught the industry by surprise when it was unveiled last week, leaving representatives struggling to make the case that the tax credit served its purpose of attracting and retaining insurance companies to the state.
Challenged by lawmakers to cite names of insurance companies that came to the state based on the tax credit, the industry pleaded it need more time to compile a list. That, however, did not stop industry representatives from offering their arguments why the tax credit should stay in place.
Florida Insurance Council representative Paul Sanford, quoting statistics gathered by state regulators, pointed out that insurers in the state currently employ 180,000 individuals. He said that represented a 47,000 increase since 2008.
Maintaining the premium tax is working, Sanford raised the specter of the state losing jobs to other states offering business incentives to insurers if Florida repeals the credit.
“If you look at industry jobs, they are highly movable jobs involving highly skilled people,” said Sanford.
But even the industry’s staunchest allies expressed doubts that the tax break was the make or break reason insurers decided to do business in the state.
“I believe companies come to this state because they believe they can make a profit, pure and simple,” said Senator John Thrasher (R-St. Augustine]. “I believe where we can help is less regulation and less government involvement.”
Still, some lawmakers expressed caution about repealing the tax, especially since the state is still recovering from the recession. They warned that while the proposal is a laudable goal to reduce the cost on drivers, now may not be the best time to change the industry’s tax scheme.
“We need to tread carefully when we make the decisions on one of this things,” said Senator Garrett Richter (R-Naples). “Unintended consequences are very frequent.”
American Insurance Association Gerald Wester noted that Dade County, Jacksonville and the Tampa Bay area have become the favored places for insurers to build service centers that handle claims for national insurers on a national or regional basis.
Wester said the premium tax credit should get credit for attracting those insurers that employ a large number of people.
“Two hundred and twenty million dollars, that’s a lot of money and I got to believe that was a big consideration,” said Wester.
But several lawmakers made the case that the state should not be in the business of picking winners and losers. They noted that the same arguments about attracting insurance jobs could apply to banks, printing firms or any industry that opened backroom operations.
They pressed forward with the argument that it is time to review the tax credit, see what it has accomplished and weigh that against the positive impact of lower fees for drivers. That argument carried the day as one by one lawmakers voted to support the proposals.
That left Thrasher, a long-time proponent of insurance interests, to offer his condolences to the room full of insurance representatives.
“I love my friends in the insurance industry, I really do,” said Thrasher. “It ‘s my hope the industry would come back with ideas for us and not just say no.”
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