Floridians beware: Insurance premiums could skyrocket if Congress passes a ‘hurricane tax’

A recent report warns consumers against a costly provision in President Biden‘s Made in America tax plan, which is currently being debated in Congress. R-Street Institute, a non-partisan public policy research organization, predicts that one provision of Biden’s tax proposal will increase insurance costs for all U.S. consumers, from insurers and businesses to homeowners and renters.

The tax provision, which critics call Cyclone tax, would set a higher corporate tax rate for insurers and reinsurers, inevitably leading to higher costs for consumers. The R-Street Institute says the Hurricane Tax label is deserved, as the provision is likely to result in significant property tax increases for disaster-prone states like Florida and Texas, as well as places like New York City and the United States. California.

The author of the report is Dr Lars Powell, senior fellow at the R-Street Institute and director of the Alabama Insurance Information Center and research at the University of Alabama. He predicted the serious impact the tax provision will have on Florida families and small businesses, and that doesn’t paint a pretty picture for the Sunshine State.

Dr Powell estimates that the state’s annual insurance premiums could increase to as much as $ 1.62 billion, depending on actual tax rates set by Congress. This tax hike could cause Florida families to pay an additional $ 300 each year for property insurance premiums.

“It’s what I call an unforced error,” said Powell. “It’s the byproduct of a stupid tax that doesn’t generate revenue for the US Treasury but must instead increase the cost of your insurance.”

He also warned of the impact of the hurricane tax on Florida’s insurer of last resort, Insurance of citizens’ property, whose stability depends on the private market. Dr Powell argues that if the private market does not have a strong global reinsurance market to rely on – including those in Bermuda, a reinsurance capital of the world – in order to diversify and manage its risks, citizens will be overburdened and all costs associated with disaster assistance will increase.

“It’s not just about homeowners’ bonuses. It’s anyone who buys insurance, or buys something from someone who buys insurance, ”Dr. Powell said. “This will force Bermuda and other countries with large offshore insurance markets to charge companies a Bermuda corporate tax that does nothing for the US Treasury. It doesn’t pay anything and only feeds someone’s idea of ​​fairness.

While the tax plan is still in the early stages of debate in Congress, Dr Powell believes there is still time for policymakers to define the layout and prioritize the insurance needs of Floridians, who are already paying among the Highest property insurance rates in the country. .