Florida Proposal Cuts Insurer Tax Credit, Lowers Vehicle Fees

A Florida senator’s revenue-swapping proposal that would repeal a decades-old tax credit for insurance companies while cutting annual vehicle registration fees by $12 per vehicle will be heard in a committee Thursday.

Sen. Joe Negron (R-Stuart) offered his proposal last week in a bid to redirect money to drivers in the state as senators “reprioritize” the state budget in an ongoing budget assessment.

The measure, which stems from the Intensive Budget Review, was “exactly what I had in mind,” according to Senate president Don Gaetz (R-Niceville), who initially called for the budget re-evaluation and now supports Negron’s proposal.

The proposal took form as SB 7132, which was introduced to the Senate Monday and will be heard Thursday in the Senate Committee on Appropriations, which is chaired by Negron. The committee hearing is expected to draw opposition from insurance carriers in the state.

Under SB 7132, the state’s general revenue fund will shrink by about $225 million once vehicle fees are lowered, but the tax credit rollback is estimated to add at least $220 million, according to a legislative analysis. Negron said that his proposal to swap the monies was a “revenue-neutral” move.

Looking Back at Insurers’ Tax Credit

The tax break that insurance companies currently get for up to 15 percent of salaries for Florida-based employees was implemented in 1987.

Before 1987, Florida insurers were exempt from a state premium tax (currently 1.75 percent) while out-of-state insurers with regional offices in the state were taxed at lower rates. That “differential” tax structure was swapped out for a tax credit that was originally 10 percent before being raised to the current 15 percent, according to an Appropriations Committee analysis.

The tax break equaled an estimated $230.1 million in salary credits last year, according to the analysis. Negron called the targeted tax break “outdated.”

“This benefit for insurance companies was well intentioned,” he said. “But times have changed and we need to reprioritize. We can take the revenue we save from eliminating a tax credit which benefits insurance companies and use it to reduce fees for every Floridian who drives a car.”

Bill Seeks to Restore Fees to Pre-2009 Levels

The setup for vehicle registration would restore fees to pre-2009 levels as follows:

–Registration service charge: reduced from $5 to $2.50
–Validation sticker service charge: reduced from $3 to $1
–Retro-reflective tag sticker: reduced from $1.50 to $0.50
–License tax surcharge (going to the State Transportation Trust Fund): reduced from $4 to $2
–License tax surcharge (going to the Grants and Donations Trust Fund for the Department of Juvenile Justice): reduced from $5.50 to $1

The total decrease would mean $12 less annually in the amount paid to register a car. The bill’s fee structure would go into effect on Sept. 1 if approved.

The state Legislature approved a slate of vehicle-related fee increases in 2009, inflating costs for motorists looking to get licenses and titles, retrieve records and reinstate their license, among other things. According to Gaetz, lawmakers made a “hard choice” during that “difficult budget year,” moving to hike fees instead of taxes or reducing state services.

The fees were raised “during the height of Florida’s economic decline,” with 2009 seeing state revenue shrink by 25 percent compared with 2006-07, when the state hit a high in revenue, according to Gaetz. But now, he said, “times have changed.”

“It is time that we reprioritize and evaluate ways to keep more money in the pockets of hard working Floridians,” he said in a statement.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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