R Street concerned about protectionist reinsurance tax
WASHINGTON (March 4, 2014) – The R Street Institute today expressed concern about a plank in the White House’s proposed 2015 budget that would impose protectionist taxes on legitimate reinsurance transactions made by affiliates of non-U.S. companies.
The proposal, which the White House estimates would raise $7.57 billion over the next decade, would disallow the deduction for certain reinsurance transactions between domestic insurers and reinsurers and affiliates that are based offshore.
“This proposal violates the fundamental principle that, in a free and open society, similar parties and similar transactions should be treated equitably, regardless of where a person is from or where a company is headquartered,” R Street Senior Fellow R.J. Lehmann said.
The proposal – and similar legislation from Sen. Bob Menendez, D-N.J. and Rep. Richard Neal, D-Mass. – would particularly impact states like Florida and California, which face significant natural disaster risks and depend on insurance and reinsurance capacity from firms headquartered outside of the United States. A report from the Cambridge, Mass.-based Brattle Group estimated taxing such transactions would cost consumers between $110 and $140 billion over the next decade.
Earlier this year, R Street joined with seven other taxpayer and free-market groups – including Americans for Tax Reform, National Taxpayers Union and Americans for Prosperity – to send a letter to the Senate Finance Committee opposing these sorts of protectionist tax proposals.
