President Biden released his audacious American Jobs Plan along with his Made in America Tax Plan, which are intended to revitalize our country’s infrastructure and the economy. But the efforts promise to be both problematic and massively expensive, with a price tag of around $2 trillion.

Within the patriotic-sounding Made in America plan are substantive corporate tax increases with the goal of bankrolling some of Biden’s jobs plan. But they will also serve to alter corporate behavior. These provisions “will reward investment at home, stop profit shifting, and ensure [that] other nations won’t gain a competitive edge by becoming tax havens,” according to the White House.

While these may sound like worthwhile goals at first, the reality is that Biden’s approach builds off of some of Trump’s economic nationalism policies, and they are sorely misguided. Indeed, it could and ultimately hurt Georgians in ways that the Biden administration may have not even considered and wreak further havoc on the property and casualty insurance industry.

One of Trump’s signature pieces of legislation was the Tax Cuts and Jobs Act of 2017, which lowered the overall corporate income tax rate, but it also implemented the Base Erosion and Anti-abuse Tax (BEAT). (BEAT). Essentially, BEAT is a 10 percent minimum tax that “applies to ‘base erosion payments’ i.e., certain deductible amounts paid or accrued by an applicable taxpayer (U.S.) to a related foreign party,” the Society of Actuaries wrote.

Biden has evidently deemed BEAT insufficient at both capturing desired revenue and incentivizing corporations to invest in the United States. So, as part of the Made in America Tax Plan, the president announced his intention to replace BEAT with Stopping Harmful Inversions and Ending Low-tax Developments (SHIELD). It is BEAT on steroids, and for most larger businesses, it would “deny deductions on payments to foreign related parties.” This would encourage U.S. corporations to spend more capital within the United States or else face an even heavier tax burden.

While it remains to be seen how SHIELD would operate in all instances, it appears that Biden is using a hatchet when he should opt for a scalpel. Biden’s goal is to incentivize businesses to keep investments within the country and forbid the use of foreign business transactions as deductions. But there are times when it’s highly beneficial for U.S. entities to shift capital overseas, especially in the insurance market.

Under current laws, insurers are required to maintain reserves to cover all potential claims, even in the event of a major natural disaster, like the threat of severe weather. This is an ever-present risk in Georgia too, considering that the Peach State accounts for 93 of the nation’s 291 major disasters from 1980-2021. Yet the reserve mandate protects consumers and guarantees insurer solvency.

In order to meet these requirements and provide further insulation from the financial impacts of catastrophic events, property and casualty insurers often purchase reinsurance. It is essentially insurance for insurers, which helps to spread financial risk, and it is a critically important business expense for insurers. One of the problems with SHIELD is that the majority of reinsurance is held by foreign entities, like those in Bermuda, Lloyd’s of London, etc. This means that insurers could be punished with a larger tax burden for making prudent business decisions like purchasing foreign reinsurance policies.

The result of SHIELD remains to be seen but it could play out in a variety of ways—none of which are good for consumers. Insurers could continue purchasing foreign reinsurance but SHIELD could make it costlier. This expense would almost certainly be passed on to insureds who would either be burdened with higher premiums or would forgo property insurance altogether. Insurance companies might also consider buying less reinsurance, which would only increase their exposure or force them to write fewer policies.

Another option would be to purchase more American reinsurance. This is a far less plausible scenario, given that there are fewer major domestic reinsurers, but if insurers managed to switch to American reinsurance, this would create a problem. Insurance is about managing and spreading risk, but in the scenario of a major catastrophic event, American insurers and American reinsurers would hold all of the risk and bear much of the financial brunt, rather than sharing it with foreign parties.

If Biden’s proposal is truly about prioritizing American interests, then he needs to go back to the drawing board. Yes, America’s tax code is a mess and could use revisions, but his Made in America plan is fraught with problems and could place undue stress on Georgians and on the wider insurance market.