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According to an Ernst and Young study, the tax burden borne
by property and casualty companies is extremely high, far greater
than that absorbed by other businesses.
When all assessments and
gross receipts taxes are compared a franchise tax structure,
the rate
is 38.2% if premium taxes are considered alone, and 51.2% if
all taxes and assessments are considered. Thus, the effective
tax rate
on insurers is more than 11 times the rate of most Texas businesses
paying the 4.5% franchise tax.
Such a high tax rate is a great strain on the fragile Texas
insurance marketplace. The legislature took steps to
save the market
by reforming insurance regulation
in the 78th Regular Session. The recovery was only the beginning, and many
variables still may aid or inhibit the establishment of a
healthy, sustainable market.
A tax structure and rate for insurance like other Texas businesses would
certainly bolster the marketplace, and benefit Texas consumers.
At the very least, when the Legislature convenes, it should avoid any additional
tax burden on the insurance market, whether from direct
taxes and surcharges on insurers,
or new taxes on services insurers need to provide insurance or satisfy
claims. Such
an increase in taxes, intended or otherwise, would seriously compromise
the establishment of the healthy insurance market intended
by policymakers, and
be inconsistent
with your efforts to lower insurance rates in our state.
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