Alliance: We'll Battle N.Y. Gov's Insurance Tax

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By Daniel Hays

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NU Online News Service, Feb. 4, 4:13 p.m.EST?An insurance trade group lobbyist promised today thatinsurers will fight "tooth and nail" against a budget proposal fromNew York Gov. George Pataki to boost the premium tax on carriers by$150 million.

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The opposition was voiced by John Cucci, Northeast regional vicepresident for the Alliance of American Insurers, who confessed thathe expects an uphill battle given a two-year budget gap that Mr.Pataki said stands at $11.5 billion.

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But he said the Alliance "will certainly try and lobby againstany increase or a smaller increase. We don't think we should bepicked on when the auto [insurance] market is in the tank. And withproblems with asbestos and mold claims, this could make thingsworse," he said.

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Mr. Pataki's budget, unveiled last week, also includes anadditional charge for vehicle owners insurance.

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By the Alliance's estimate, under the Pataki Administrationproposal the taxes paid on premium would increase 22.5 percent tomore than $900 million.

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The increase would result from a change in method. Currentlywith property-casualty insurers, there is a bifurcated tax of a 1.3percent premium with a 7.5 percent income tax with a cap equal to 2percent of premium.

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Life insurers currently have a 0.7 percent premium tax with a7.5 percent income tax component--also capped at 2 percent.

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Under the new budget scheme, companies would pay a straight 2percent premium tax.

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Another proposal calls for a $1 per vehicle policy fee thatmotorists pay towards theft and fraud prevention being raised to$5. In addition, there would be a provision allowing local countiesthe option of collecting another $5.

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"It's a horrible budget deficit year and they [the legislature]are going to try and get money any way they can. But we will befighting this tooth and nail. This is not the time to raise taxeson companies," Mr. Cucci said.

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Mr. Cucci noted that Mr. Pataki had said the proposed change inthe revenue stream was not a tax increase. "But the net result istaxes go up," Mr. Cucci said. "It's a semantic game."

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