Republican legislators plan to pass a tax break for the state’s insurance industry. Insurance companies pay a two percent tax on every premium sold in Iowa. Seventeen other states, however, lowered their insurance premium taxes. States have a retaliatory system for insurance premium taxes, so that means if an Iowa company sells a life insurance policy to a Nebraskan, for example, they have to pay the higher two percent tax to the state of Nebraska even though Nebraska’s tax is one percent. Senate Republican Leader Stewart Iverson of Dows says if the state of Iowa doesn’t lower its tax, there’s a chance Iowa-based companies will move to lower-tax states.Republican Mary Kramer of West Des Moines, the Senate President, is a retired insurance company executive. Kramer says it’s not difficult for insurance companies to move, so it’s important to help them stay competitive in Iowa.John Schachterle, the executive director of the Federation of Iowa Insurers, says Iowa has recently eclipsed Hartford, Connecticut, as the nation’s insurance capital, but that’s endangered if companies start moving their operations to lower-premium-tax states.The proposal would gradually lower Iowa premium tax, but Iowa-based insurance companies have agreed to pre-pay their taxes so there’d be no immediate tax revenue decline for the state.
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