Indiana’s massive budget bill, which includes a provision that would freeze the state insurance premium tax phase-down, narrowly passed the House this week.
Current law sets up a premium tax reduction schedule that provides incremental relief to insurance companies- from 2 percent to 1.3 percent- over a five-year period. The 2002 premium tax reduction to 1.8 percent is already in place. House Bill 1004 would significantly slow down this schedule according to National Association of Independent Insurers (NAII) Counsel Robert Hurns.
Under the bill, the premium tax would hover at 1.8 percent through 2004 and would eventually reach 1.3 percent in 2007. Other neighboring states, such as Illinois and Michigan, already enjoy lower tax rates. For example, the premium tax rate is .5 percent in Illinois and 1.19 percent in Michigan.
“We urge Indiana senators to amend this bill and retain the original phase-down schedule,” said Hurns. “Reducing the premium tax attracts more businesses to Indiana. Without a lower premium tax, insurers have less incentive to do business in this state-especially when the premium tax is lower in neighboring states. The premium tax we fought hard to achieve should remain on the intended schedule.”
The bill is assigned to the Indiana Rules and Legislative Procedures Committee and scheduled for a hearing Feb. 11.
HB 1004 contains Gov. O’Bannon’s tax restructuring plan, which would raise sales taxes, increase taxes on cigarettes and casinos and suspend two tax cuts approved in 1999.
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