Insurance
Premium Tax Reduction Addressed by
House Ways And
Means Committee
On
Wednesday, April 3, the House Ways and Means Committee addressed
and passed SF 2318 – a bill that helps to insure that Iowa
maintains its position as a national leader in the insurance
industry.
The
legislation in SF 2318 reduces the tax charged to insurance
companies on the premiums they collect by 50% over the next four
years.
In
addition, the proposal reduces the premium tax paid by Iowa’s
health, life, and property and casualty insurance companies by
.25% each year beginning in fiscal year 2003, until it reaches 1%
in FY 2006. However,
the state will continue to receive the equivalent of a 2% premium
tax in fiscal years 2003, 2004, and 2005 through the insurance
companies’ prepaid tax liability.
This part of the proposal was planned to avoid negatively
impacting the state’s already precarious fiscal situation.
Currently,
Iowa insurance companies pay a 2% tax on all insurance premiums
they collect. Seventeen
other states have a lower premium tax, but charge Iowa-based
companies a retaliatory tax, equal to Iowa’s 2% tax.
It is currently estimated that Iowa-based health and life
insurance companies will pay approximately $28.5 million in
retaliatory taxes to other states in 2003.
For
example, in Nebraska, a Nebraska-based insurance company pays a 1%
premium tax, but an Iowa-based insurance company pays a 1% premium
tax, plus an additional 1% retaliatory tax.
The retaliatory tax serves as a disincentive for insurance
companies to remain based in states like Iowa that maintain a 2%
premium tax. Illinois
and Wisconsin have premium tax rates just below 1 percent.
If
Iowa-based insurance companies were to leave the state, it could
be devastating to Iowa’s already shaky economic situation.
The insurance industry has been one of Iowa’s fastest
growing and vitally important industries.
Insurance provides over 40,000 jobs throughout Iowa, and
provides economic growth. According
to two studies prepared by the national firm of Ernst & Young,
reducing the premium tax would create nearly 6,000 new jobs in
Iowa related to the insurance industry
SF
2318 is an extraordinarily important to Iowa’s citizens and
economy; it retains and creates jobs while growing the insurance
industry and stimulating Iowa’s economy.
This reduction will increase the competitiveness of
Iowa’s insurance companies, while encouraging the expansion of
in-state employment by these companies, as well as the possible
relocation of new insurance companies and employment to Iowa.
Governor Fails
To
Support Economic
Development
Governor
Vilsack has claimed that economic development in the state of Iowa
is important. Yet,
when it comes to taking action to encourage economic development,
he continues to fail.
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The
best example of Vilsack’s failure is the funding of the Department
of Economic Development (DED).
Since Vilsack took office, he has continually cut funding for
the department -- from $25 million in 1999 to a projected $18
million in 2003 (and proposed cutting it further to $15.4 million).
Granted, Iowa is in a budget crisis, but economic development
had taken a 27% cut in funding since Vilsack took office.
With
a lack of support for economic development from the Governor, it is
not a surprise that Iowa is losing its population to other states
In
order to encourage and sustain development, assistance is needed.
Most of these areas (life sciences, advanced manufacturing,
and information solutions) utilize the Business Development Division
of DED for grants, loans and other forms of assistance.
It is difficult to convince companies to locate and develop
in Iowa if there is no assistance available, while other states are
willing to provide generous assistance without adequate support and
assistance, companies are choosing not to locate in Iowa and are
even leaving Iowa. Sadly,
our skilled workforce follows these companies by also leaving the
state.
Republicans
have realized that in order to move ahead, investing in economic
development is a must. That
is why Republicans have proposed funding the DED with $2.8 million
more than the Governor ($18.3 million compared to $15.4 million)
along with the “Iowa Investment Initiative” that was passed
early in the session. Goals
can be set, but it takes a show of action to be able to achieve
these goals. If
economic development succeeds in Iowa, Iowa will succeed.
More jobs and better paying jobs will be available, and
Iowa’s college graduates will be less likely to leave the state.
Ways
& Means Update
Bills
Passed Out Of The Ways & Means
Committee
This Week:
HF
95
Relating to the time of possession of deer venison,
increasing the minimum fine for unlawful taking, possessing,
injuring, or transporting protected species and game, and subjecting
violators to a penalty.
HF
2524
Relating to the regulation of milk and milk products, by
providing for permits, fees, and penalties
HF
2570
Relating to volunteer fire fighters by creating a township
fire department fund and allocating a certain portion of insurance
premiums tax to the township fire department fund, establishing a
volunteer fire fighter pension task force.
SF
2318
Relating to the tax on premiums and subscriber contract
payments received by insurance companies and health service
corporations by phasing in a reduction in the tax and increasing the
prepayment of the tax.
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