‘Hurricane tax’ vote delayed
The US trillion-dollar bipartisan infrastructure plan suffered a setback late last night when the House of Representatives delayed the vote on the crucial piece to US president Joe Biden’s domestic agenda.
The fate of the proposals are expected to have vast implications for the Biden presidency, congressional control of the US Government after next year’s midterm elections, but also the future of catastrophe insurance in gulf states.
Bermuda companies provide more than 60 per cent of the hurricane reinsurance in Florida and Texas, backing the states’ local insurance companies.
But that might change if what’s being referred to as “the hurricane tax” remains in the Biden Administration’s proposed $3.5-trillion Public Infrastructure Bill.
The Bill, titled the American Jobs Plan, aims to initiate a significant overhaul of US infrastructure, but also may have huge consequences for Bermuda’s international companies, including the re/insurance industry.
To pay for the multifaceted plan, President Biden’s Made in America Tax Plan calls for an increase in the corporate tax rate, and raising the global minimum tax paid by US-based and other multinational corporations.
The plan also seeks the elimination of the deduction currently provided for foreign-derived intangible income, making it harder for American companies to move or shift their income to their foreign subsidiaries.
But opponents say that under the Biden plan, taxes on reinsurance would increase — which would, inevitably, be passed down to property insurance consumers.
They say that an unintended consequence of this tax increase would be that some Florida homeowners would refuse to buy the resulting more expensive property insurance.
That, they say, would put financial strain on US government emergency programmes — and expose the uninsured to possibly catastrophic losses of their homes and businesses if a huge storm destroyed their properties.
While the White House has vowed that no one earning less than $400,000 a year will be negatively affected by the tax plan, critics say that the hurricane tax would break that promise by affecting people at all income levels.
This week, Florida’s chief financial officer criticised the Bill, which he is convinced will increase insurance premiums on all Florida homeowners.
Jimmy Patronis was speaking in Sarasota at the September board meeting of Enterprise Florida Inc., a public-private partnership of business and government leaders working to expand and diversify Florida's economy through private-sector job creation.
He told them: “I want to take this opportunity to warn all Floridians about a provision buried within Joe Biden’s ‘Human Infrastructure’ Bill that creates a hurricane tax that will increase insurance premiums on all Florida homeowners.
“These tax hikes are sure to drive up insurance rates, run domestic carriers out of Florida and, what’s worse, make Floridians more vulnerable to hurricanes. We must let Washington know that anything that increases premiums on Floridians is a non-starter.”
Mr Patronis is not just Florida’s CFO but also the state fire marshal, a statewide elected position, and, a member of Florida’s Cabinet who oversees the Department of Financial Services.
He is not the only conservative voice expressing concern this week.
In January next year, Brewster Bevis will be the new president and CEO of the Associated Industries of Florida, the “Voice of Florida Business” in the Sunshine State.
In an opinion piece that came out yesterday in the Tallahassee Democrat, Mr Brewster railed against politicians trying to sneak through taxes that end up harming businesses and consumers.
“This hurricane tax isn’t fair,” he said, “and it hurts the welfare of our state.”
Meanwhile, the non-partisan R-Street Institute has estimated that insurance premiums across the United States will increase between $10 billion and more than $20 billion a year, if the provision is signed into law.
In Florida, they say, the increase would be especially dramatic, since families there would see an annual total premium increase of up to $1.62 billion.