Insurance tax rollback unlikely
City commissioners hoping to roll back a 2 percent increase on insurance premium license fees before the
Even if city coffers could go without that final tax stimulus, officials would need to notify the state of their intentions to reverse it by
"We need that revenue," said
Insurance premium license fees are taxes local governments impose on insurance companies at a premium rate their customers pay for policies. More than 350 cities and 35 counties currently levy the tax, according to the
Hamric said most, if not all, insurance companies pass the tax burden directly back to their customers, and state law requires them to make note of that on premium notices.
The 2009 ordinance earmarked money the city collected as part of that 4 percent increment directly to servicing those 30-year bonds. So, in fact, Hamric said, the general fund still only draws the original 4 percent rate.
Last year, as part of a plan to restore the city's dwindling reserves, the city commission approved raising the IPLF again to 10 percent in addition to occupational and net profit increases and compensating property tax rates.
Both the 2009 and 2017 rounds of tax hikes exempted qualifying health plans, a detail that Hamric said illustrated the fickle nature of the tax itself.
"Our original ordinance had included health plans in the 4 percent increase," she said. "But the county exempted theirs, so I think the heat was on for our city commission to do the same."
That "peer pressure," as Hamric put it, amounted to an 18 percent cut in revenue when compared to the city's original estimates.
In 2016, the city noticed another drop in IPLF revenue, and an internal audit revealed that a single, large life insurance policy that had been taken out the year before had resulted in the loss of
"We do not have the staff or time to go through every single policy, and I'm not even sure we would know even if we did, because I had to make phone calls to the insurance company and the (
City and county governments have an enormous amount of control over premium tax rates and minimums, said IIK Executive Director
Treesh, a former state representative for
House Bill 524 required insurers to give their customers notice about the tax with information that included the jurisdiction for which the tax was assessed. The idea, he said was to give policyholders the opportunity to identify errors more easily. The law also mandated risk location technology to verify exactly where a customer lives and what jurisdiction has tax authority over his or her policy.
"If I live in one city with a 10 percent insurance premium tax but the county only collects 5 percent or even no tax at all," Treesh said, "we need to be sure exactly where you live and what jurisdiction has the authority to tax -- for their sake and yours."
But the law, he said, could have gone further.
Of course, he said, he understands how unpopular such a notion might be.
"It was a nonstarter for local governments in 2008, and I believe it would be nonstarter for them now, too," he said.
The only way to centralize local government collections, he mused, would be to include it in broader tax reform legislation that gave governments something to bank on like add-on sales tax or expanded home rule.
That's what
THe IPLF, he said, is just another part of that effort.
"It's another piece to the puzzle that we were trying to put together to put the least amount of taxes we could possibly do and try to get participation from everybody," he said.
When the city proposed the 2 percent hike last year, Mayor Pro Tem
Last week, Glenn said his position hasn't changed. He understands that insurance premiums do give consumers more control, since they can raise their deductibles to lower premiums, but insurance taxes often hit those lower-income individuals without a stable paycheck.
"You may be retired so the occupational license fee means little to you," he said. "But if you own a car, you're paying those monthly payments and they're just getting higher and higher."
If lawmakers in
Smith-Wright said its hard to prepare a budget for the next fiscal year when there remains so much doubt about what the city's bill might be.
"No matter which way you look at it, it doesn't look like you can stop that insurance tax before it takes effect," she said. "But it's not over until it's over. What I can say is that I don't want to entertain another tax increase again."
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