On March 25th, Florida State Senator Joe Negron filed SB 7132 dealing with motor vehicle registration fees and the elimination of a long-standing tax credit provided to insurance companies. The Appropriations Committee is currently scheduled to discuss the bill on March 28th. Under the bill, revenue lost from a reduction in vehicle registration fees would be offset by the elimination of tax credit. Sen. Negron estimated the elimination of the tax credit could generate $220 million of additional revenue that could then be used to offset the revenue lost by reducing vehicle registration fees.
The bill seeks lower vehicle registration fees that were just increased in 2009. Specifically, the bill looks to, among other things, lower the fee for issuance of an original licenses plate from $5 to $2.50, lower the service charge for issuance of license plate validation sticker from $3 to $1, and lower the surcharge of license tax from $4 to $2. To give some context to the amount of savings for individuals, the estimated savings of $220 million would be spread out over the roughly 18 million registered vehicles in Florida1, amounting to around $12 per vehicle.
On the other hand, the bill looks to remove the allowance for an insurer to take credit against their premium tax for up to 15% of the salaries of non-licensed employees located in the state of Florida. This tax credit has been in place since 1987, and it acts as an incentive for the state to attract more jobs in the insurance sector. It also provides for carriers who employ more Floridians to enjoy a cost advantage over those who employ fewer.
While lowering front end fees on all individuals who operate a licensed vehicle, the bill puts additional hindrances on the domestic insurance market. These domestic carriers have made significant financial commitments to Florida, and have dedicated management teams, operations, and facilities in the state that employ Floridians. If this tax credit is removed, these carriers will be faced with increased costs that will hamper their competitive positions against carriers who do not employee Floridians.
Any insurance carrier operating in the state who employees Floridians will be affected. The domestic carriers, who tend to have a large percentage of their employees within the state, will be most affected. These include domestic carriers who write automobile, commercial insurance, workers compensation, medical malpractice, etc. Ultimately, these costs will be passed back down to Floridians in the form of higher insurance rates. What may not be understood by some is how many Floridians are dependent on insurance from domestic carriers. To provide some insight, around 40% of households in Florida receive property insurance from a domestic private insurance company. When all lines of business are considered, this percentage is sure to grow and the pool of people receiving benefits becomes more and more aligned with those paying the costs. Is this proposal just robbing Peter to pay Paul?
What are your thoughts on this bill? How would this proposal affect your business and tax burdens?