AIA Urges Nev. Governor to Drop Proposal to Double Tax Insurers

January 27, 2003

The American Insurance Association (AIA) called upon Nevada Governor Kenny Guinn (R) to abandon his proposal to double tax insurers operating in the state. In order to tackle Nevada’s $1 billion budget deficit, Gov. Guinn’s appointed Task Force on Tax Policy is recommending imposition of a 0.25 percent gross receipts tax on all businesses, except for small businesses and the gaming industry.

“AIA’s member insurance companies understand that Nevada is facing a very serious budget crisis. However, this gross receipts proposal will result in double taxation of insurers,” said Mark Sektnan, AIA assistant vice president, western region. “Nevada insurers already pay one of the highest premium tax rates in the country. Gov. Guinn’s own task force found that insurers’ taxes are the third largest tax revenue source in the state, and this revenue is projected to continue growing steadily. Double taxing insurers will only further burden an industry that is struggling in the marketplace.”

Under Nevada law, insurers currently pay premium taxes at a rate of 3.5 percent for every dollar they collect in premium. Nevada has the third highest premium tax rate in the nation behind Alabama and Hawaii. Insurers must pay the taxes on premiums regardless of profitability, even in years when a company suffers catastrophic losses from events such as natural disasters. No other state in the country requires insurers to pay gross receipts taxes or bank and corporation taxes in addition to premium taxes.

“We urge the governor and the Task Force to reconsider this proposal,” said Sektnan. “Insurers play a vital role in Nevada’s economy by providing the safety net necessary for businesses and individuals to take risks. Insurers also provide jobs to more than 9,000 Nevada residents, which generates more than $348 million in salaries that is invested back into the state’s economy. Insurers are also major investors in state and local bonds, which finance the improvement of Nevada’s infrastructure and essential services.”

“In 2000 alone, insurers paid $129 million in premium taxes to the state of Nevada,” said Sektnan. “Insurers are only one of three business sectors that currently pay business tax in Nevada. Adding to the cost of doing business in Nevada will only make it harder for insurance companies to operate and expand.”

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