A local lawmaker is looking to start a discussion on a proposal to secure up to an additional $900 million in revenue for the state from insurance companies.
State Sen. Mike Kowall (R-Commerce, Highland, Milford, Walled Lake, Wixom, Wolverine Lake, White Lake, Orchard Lake, West Bloomfield) is the co-sponsor of Senate Bill (SB) 985, which is one of three in a legislative package that would authorize the state to collect up to $900 million in premium taxes early from insurance companies that would essentially be repaid to the companies through a 10 percent tax break in later years.
“This is something they (insurance companies) offered to the Legislature,” Kowall said, adding that while lawmakers “don’t know if, in fact, it’s the correct thing to do or not, it’s worth the discussion.
“We are going to explore it,” he said. “We are not just going to blindly jump into anything.”
Kowall said that the plan is to ask Gov. Rick Snyder’s administration to take part in discussions. He added that the issue cropped up in light of lawmakers being “bombarded” with concerns over reports that the state has over $1 billion in unmet infrastructure improvement needs, including deteriorating roads and expressway bridges, among others.
“It would not affect the general public, the insurances that I pay or anybody else pays,” Kowall said.
Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, said the legislation “emanated out of a couple financial organizations rather than the insurance companies, per se,” but added that this particular financial investment vehicle is used in other states.
While the organization hasn’t yet come to an official policy stance on the legislative proposal that was introduced on Feb. 29, Kuhnmuench said it’s likely that it could be palatable to the industry and individual insurance companies.
“If it makes sense to use prepayment of premium taxes as part of your investment strategy, I think that makes sense generally,” he said. “It ultimately comes down to questions like what the rate of return is going to be.”
The legislation, Senate Bills (SBs) 985 to 987, would be in effect from the tax years beginning Dec. 31, 2013 through the 2023 tax year. State Sens. Steve Bieda (D-Warren) and Jack Brandenburg (R-Harrison Township) are also sponsors of the legislative package.
“In today’s marketplace, that’s a pretty long-term time frame,” Kuhnmuench said. “It’s really going to depend on the individual company and what their investment strategy is.”
The bills have been referred to the state Senate Finance Committee, of which Brandenburg is chairman and Bieda is minority vice-chairman.
Bieda said there is a “good possibility” that hearings on the legislation will take place after Easter.