A decades old subsidy for the insurance industry is shedding light on differing approaches for cutting taxes in the state. A Senate panel approved a plan to plow the money into reducing a business rent tax.
Sen. Anitere Flores (R-Miami) opened her presentation with a history lesson.
“So let’s go back in history—1987,” Flores says. “In 1987, MTV had just started—they actually played videos.”
She’s backing a proposal that would do away with a 1987 provision allowing insurers to effectively write off the first 15 percent of their employees’ salaries at tax time.
“Back then we still used words like tax credit—today we call those things something different,” Flores says. “And we say we need you to come to the state of Florida, this will be a way to help you come to the state.”
“So guess what? It worked.”
Today, Flores argues, lawmakers call that kind of tax credit corporate welfare.
But Florida Blue lobbyist Paul Sanford says the subsidy isn’t just about encouraging employment—it’s about keeping rates low. Florida charges a tax on the premiums insurers collect, and the 15 percent subsidy allows them reduce the amount they owe. Sanford says removing it will send everyone’s premiums higher.
“The lower the premium taxes are—that is a factor that’s included in determining every premium that’s charged for an insurance policy,” Sanford says. “When that is a lower number, premium rates are lower.”
“When you repeal this credit, taxes—premium taxes—are going up $299.6 million,” Sanford says, “which means insurance premiums are going up $299.6 million.”
Others are invoking one of the Florida Legislature’s third rails. Associated Industries of Florida and the Chamber of Commerce call the measure a tax increase. But Senate President Joe Negron pushes back.
“So every single dollar that is in the tax credit now would go to tax relief to either individuals or businesses,” Negron says. “So there would not be any tax increase. I would not support a tax increase.”
The Senate panel approved the measure. But the question of where to direct the new tax relief highlights a different longstanding debate.
“Now the bill before you has one proposal,” Flores explains, “the chairman has a different proposal, and I hope that no matter what comes out of this we reflect today’s priorities.”
Her proposal would trade the insurance subsidy for reductions in the communication services tax—a fee on things like cable and cell phones. Lawmakers have already cut the tax by about half a billion dollars in the last two years. But rate payers might not have noticed because the individual reduction is minimal—less than two bucks on a $100 monthly bill.
Committee Chair Kelli Stargel offers a different, business-targeted proposal instead. The Lakeland Republican wants to cut the tax Florida charges on commercial leases.
“That is something that every business that leases space in the state of Florida has to pay,” Stargel says. “It’s something that many people have been working on for years, and I think that then takes this subsidy and distributes it among all the states of Florida.”
The committee agreed with Stargel’s suggestion.
And the idea is one of the few places where the Senate, House and governor might find some common ground. In a session so far marked by bitter disputes, it might be the beginning of a negotiation.