Malloy To Propose Lowering Insurance Tax, Could Save Industry Millions

Jan. 30--Gov. Dannel P. Malloy will propose lowering an insurance tax that would save the industry $11 million next year and $22 million in the following year in Connecticut.

The cut involves lowering the current tax rate on insurance premiums from 1.75 percent to 1.5 percent.

"There are simple and relatively inexpensive ways we can improve the business climate by making state government more predictable and sustainable," Malloy said in a statement. "The insurance industry has a long and storied history in Connecticut, and we must ensure that we maintain our competitive edge so that they continue to thrive and grow in our state."

He added, "Restructuring and lowering the premium tax will substantially improve market conditions for Connecticut-based insurance companies. This change will save them millions in taxes paid to other states across the country."

The idea received immediate support from Senate Republican leader Len Fasano, who has often been at odds with Malloy on policy issues. The 10,000-member Connecticut Business and Industry Association and the Insurance Association of Connecticut, which represents The Travelers, State Farm, Prudential, and others, also support the proposal.

"It's reducing overall costs here,"Joseph Brennan, the president of CBIA, said in an interview. "It's a step in the right direction."

The new policy, if approved by the legislature as part of the state budget, would help Connecticut-based insurers when they pay taxes in other states. The change would be effective on Jan. 1, 2018.

In Iowa, for example, Connecticut-based insurers currently pay the rate of their home state, which is 1.75 percent. Even though Iowa's premium tax rate is lower at 1 percent, the Iowa law says the insurer must pay the higher rate from the other state -- meaning 1.75 percent.

Across the country, states have widely varying rates on insurance premiums -- ranging from 0.5 percent to 4.35 percent. But many states have enacted a "retaliatory" tax, which forces the insurer to pay the higher rate of the two states.

Connecticut-based companies would save money in their dealings with Iowa, for example, but those out-of-state savings would not have any impact on the Connecticut state budget. In the same way, out-of-state insurers would continue to pay the retaliatory premium tax to Connecticut.

Hartford has long been known as the nation's "insurance capital," even though jobs have been growing in other states. Statewide, insurance companies employ more than 58,000 fulltime workers in Connecticut at an average annual salary of nearly $85,000 per year, officials said.

Malloy's proposal will be made a part of the two-year budget that he will unveil on February 8.

Fasano and Sen. Kevin Kelly, the Republican co-chairman of the insurance committee, issued a joint statement that hailed Malloy's proposal.

"We thank the governor and applaud his efforts to support Connecticut's insurance industry and help reduce the burdens on Connecticut companies," the senators said. "Due to the retaliatory tax structure in other states, this proposal will help Connecticut insurance companies in their business transactions throughout the country. Our state must work hard to preserve Connecticut's historic role as the insurance capital of the world. This proposal is a smart step forward."

"We must seek to remain our nation's insurance capital," Senate President Pro Tem Martin Looney, a New Haven Democrat. "On its face, this proposal demonstrates Connecticut's commitment to working with the business community in order to help our companies thrive in a global marketplace. I look forward to reviewing it in the larger context of the governor's proposed budget."

Eric George, the president of the Insurance Association of Connecticut, said the change would be "tremendously beneficial" in "making us more competitive in the national market."

While a few big-name companies get most of the attention, there are 1,429 domestic and non-domestic insurers operating in Connecticut and writing $32.8 billion in direct written premiums here, officials said.

"Connecticut's insurance industry is part of our state's economic heritage, and this recognizes the importance of working with that sector to encourage its continued growth here," said House Speaker Joe Aresimowicz of Berlin. "As a potential way to help improve the overall business climate for the industry, it certainly should be closely looked at as we begin to put together our overall job growth and economic development package."

___

(c)2017 The Hartford Courant (Hartford, Conn.)

Visit The Hartford Courant (Hartford, Conn.) at www.courant.com

Distributed by Tribune Content Agency, LLC.