Up to $20bn on insurance bills from Biden tax changes, says think tank
Joe Biden’s administration’s planned global minimum tax (GMT) regime will increase the cost of insurance for US consumers by between $10.8 billion and $20.3bn a year, a US think tank has calculated.
In an analysis, R Street Institute senior fellow Lars Powell wrote that the Department of the Treasury’s Made in America Tax Plan (MATP) would impact insurers in two ways.
“First, it increases the corporate tax rate from 21 per cent to 28 per cent. Second, it implements a global minimum tax (GMT) regime with proposed rates from 15 per cent to 28 per cent. The first rule will directly increase the cost of providing insurance by increasing the tax burden on US insurers. The second provision will increase the cost of insurance indirectly, by increasing the tax expenses of international reinsurance companies, which provide much of capital for US risks, and are often located in low-tax jurisdictions.”
Bermuda re/insurers alone covered more than 30 per cent of the $100 billion insured US losses caused by hurricanes Harvey, Irma and Maria in 2017, R Street points out.
The final cost to the industry would depend on the tax rates ultimately chosen.
As these tax increases are passed through to consumers, they will effectively tax everyone who buys insurance, regardless of income,” commented Jerry Theodorou, director of R Street’s finance, insurance, and trade policy team.
The increase would likely lead to fewer families purchasing insurance, increasing the costs paid by the US government as disaster aid through the Federal Emergency Management Agency (FEMA), the think tank added.
The analysis follows calls last week from the Former Florida House representative Dennis Ross to scrap the changes he termed a “hurricane tax”.