NU Online News Service, Dec. 19, 2003, 5:33 p.m. EST – Life insurance companies doing business in New York state want to eliminate a recent tax law change that they believe digs too deeply into their pockets, says Diane Stuto, executive vice president of the Life Insurance Council of New York, Albany, N.Y.[@@]
The 2002 change increased life insurance premium taxes, Stuto says.
Until this year, life insurers in New York were taxed using a split-tax mechanism under which, in addition to income taxes, they paid a tax equal to 0.7% of premium revenue.
Gov. George Pataki recommended in a deficit-cutting proposal that the state move to a straight 2% premium tax. The proposal would have eliminated the income tax on life insurers, but, in effect, it would have led to a substantial increase in life company taxes, Stuto says.
Although lawmakers ended up approving a straight 1.5% premium tax, the increase still hurts, Stuto says.
LICONY wants the legislature to eliminate the premium tax and restore the previous split-tax system over a period of 2 years.
“We recognize that, with the budget deficit, it’s pie-in-the-sky to change it in 1 year, but we’re looking to change it back to the way it was by going back to 1.5% by 2005,” Stuto says.
LICONY also wants to replace a recent state measure that temporarily dropped the guaranteed rate on variable annuities to 1.5%, from the previous 3% minimum. The temporary guarantee reduction expires in May.
“We have a legislative proposal that would undertake to put into law a formula based on a [National Association of Insurance Commissioners] model that would set the minimum to an index tied to the Treasury rate,” Stuto says.