The Chamber believes fair and equitable practices and applications of tax policy are paramount in promoting and supporting economic development in the Greater Phoenix region and the state.
With this belief, our membership—through our Public Affairs process—supports reducing the insurance premium tax.
The current insurance premium rate of 2 percent is approximately an equivalent of 11 to 14 percent income tax rate on this industry. This imposes unequal treatment on the insurance industry, reducing our state’s competitiveness and acting as a disincentive for business retention.
The Chamber is focused on the health of our existing businesses in the region and is actively working to retain and expand businesses. Specifically, the insurance industry contributes greatly to Arizona communities through job creation, services and investments. Property and casualty insurance companies have invested nearly $9 billion in Arizona municipal bonds. As these insurers purchase general obligation bonds, they are helping support the state’s public investments. According to the U.S. Bureau of Labor Statistics, there are more than 27,000 insurance professionals across Arizona and they are integral, involved and valued community members.
The proposed change will reduce the insurance premium rate to 1.7 percent over several fiscal years. While this proposal maintains the premium tax as the system of collection, the phased reduction in the rate will begin to mend what is a substantial inequality for this industry in Arizona. Additionally, reducing the insurance premium rate will boost our state’s economy, allow insurance companies to create more jobs in the region and reduce the inequality between the insurance premium tax and the corporate income tax.
In today’s delicate economy, companies are increasingly mobile and able to relocate to places they perceive to have more ideal business conditions. As a state, Arizona needs to maintain and enact fair and equitable practices to ensure that our business environment does not pick winners or losers, is reliable and predictable.
On behalf of our 2,600 member businesses, we support HB 2276, a reduction in the state’s insurance premium tax.