Insurance premium tax boosts state revenue

Aug. 06--JACKSON -- The 3 percent tax on all insurance premiums sold within Mississippi was a key factor in making July a good month for state revenue collections.

For the month of July, the first of the new fiscal year, revenue on the insurance premium tax was $14.3 million or 54 percent above the amount collected in July 2016.

And the $40.7 million total collected in the insurance premium tax was 70.8 percent above the official estimate.

Kathy Waterbury, a spokeswoman for the Department of Revenue, explained that while the tax on insurance premiums has been a growing source of revenue for the state, the July collections were most likely an anomaly.

"About half of the increase for insurance premiums is money that should have been June collections, but didn't process until July," Waterbury said. "The remaining is a growth in the tax that has been occurring over the last several months.

"We did an evaluation of the returns and have found increases across the board."

The tax is collected on all insurance premiums sold in the state -- ranging from health, to auto, to wind insurance for homes, to flood insurance for homes.

"An increase in tax receipts is directly related to an increase in insurance premiums," she said.

In the fiscal year ending June 30, 2016, revenue from the insurance premium tax skyrocketed $50 million or nearly 23 percent. Officials with the Mississippi Department of Insurance said at least part of that increase could be attributed to people gaining health insurance for the first time through the federal Patient Protection and Affordable Care Act.

During the recently completed fiscal year, ending June 30, collections from the insurance premium tax continued to grow, albeit, by a much smaller amount -- $5.9 million or 2.2 percent.

Still, the 2.2 percent rate of growth is better than for most other sources of state revenue during what has become a prolonged period of sluggish tax collections.

Even though the insurance premium tax accounts for a little less than 5 percent of total state revenue, it still has provided a key boost at a time when other sources of revenue are not meeting projections and in some cases not even growing.

For the month of July, thanks in large part to the insurance premium tax, revenue collections were $23.9 million or 8.8 percent above the amount collected in July 2016. Collections were $16.8 million or 6 percent above the estimate.

The estimate is important because it represents the amount of money the Legislature appropriated to fund state government.

For the month of July, sales tax collections, the largest revenue source, were 11 percent or $8.1 million below what was collected during July 2016. Corporate tax collections also continued to be sluggish down $4.3 million or 23 percent from July 2016. But personal income tax collections -- the second largest source of state revenue -- was up $11 million or 10.6 percent from the previous July.

Revenue collected by the state Department of Revenue accounts for the bulk of state funds. But there are a few other sources that will be included in a report that will be released in the coming days by the staff of the Legisative Budget Committee. With those funds included, the state's financial outlook should look slightly better.

Legislators and Gov. Phil Bryant are hoping for rosier revenue reports. They have been forced to make a series of significant budget cuts during the past two years.

The governor has expressed optimism in recent months that collections from the personal income tax are improving.

bobby.harrison@journalinc.com Twitter: @bobbyharrison9

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