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CEI Blasts Rep. Neal’s Reinsurance Tax Bill

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CEI Blasts Rep. Neal’s Reinsurance Tax Bill

'An awful, awful idea'

Washington,
July 30, 2009—A Senior Fellow at the Competitive Enterprise Institute, a free
market think tank, today blasted Rep. Richard Neal’s (D-MA)  introduction of a bill to impose a special
tax—a protectionist tariff for all intents and purposes—on offshore affiliated
reinsurance.

“This is the last thing that disaster-prone homeowners
need,” said Eli Lehrer, Director
of CEI’s Center for Risk, Regulation, and Markets. “It’s an awful, awful idea.

As written, the Neal bill would impose a special 25 percent
tax on the offshore affiliated reinsurance—insurance for insurance
companies—that some primary insurers purchase from parent and sister companies.
These transactions, already taxed under a federal excise tax, would become
economically unattractive for a great many companies that engage in them. This
would reduce the supply of reinsurance and increase insurance rates. 

“This is a battle of U.S.-based reinsurers against U.S. consumers.
And the consumers will lose if Rep. Neal’s bill becomes law,” says Lehrer.
“Those who hope for a revenue windfall are hoping in vain. If this bill becomes
law, it’s likely that tax revenues will probably fall as companies stop using
offshore affiliated reinsurance.” 

CEI is a non-profit,
non-partisan free-market public policy group dedicated to the principles of
free enterprise and limited government. For more information about CEI, please
visit our website at www.cei.org.