Auto insurers could lose tax break after Michigan revenue estimates drop – MLive.com

Posted: Wednesday, May 18, 2016

LANSING, MI — Declining revenue estimates could prompt lawmakers to eliminate an $80 million tax credit they accidentally awarded to auto insurers.

State officials at the Consensus Revenue Estimating Conference on Tuesday projected lower-than-anticipated revenues. Specifically the state’s revenues are projected to be $174 million lower than previously anticipated in fiscal year 2016 and $159 lower than previously anticipated in fiscal year 2017.

With the state looking at a slightly smaller pot as lawmakers from the FY 2017 budget, House Appropriations Chairman Al Pscholka, R-Stevensville, said one thing to do is cut the unintentional tax break.

“I think this creates a real incentive for folks to understand we just can’t have a corporate $80 million handout giveaway. And that needs to get fixed. So I think it puts a little more urgency to that,” Pscholka said.

Michigan auto insurance could increase by $40 as legislature looks to reverse tax break

The issue dates back to the 2011-2012 legislative session, when the legislature approved what was basically an administrative change for the Michigan Assigned Claims Plan. It was reassigned from the Secretary of State to the Michigan Automobile Insurance Placement Facility, which opened up a tax credit for some insurance companies. That credit amounted to about $60 million in 2015, but is projected to rise to $80 million.

Michigan auto insurance could increase by $40 as legislature looks to reverse tax break

Pscholka is asking House leadership to move bills that would eliminate the tax credit, he told reporters Thursday afternoon. But Pete Kuhnmuench, executive director of the Insurance Institute of Michigan, warns that doing so would raise auto insurance rates for consumers.

“We see this as really a tax on the consumer because we’re required to incorporate all costs associated with our single product line when we set rates,” Kuhnmuench said.

State Budget Office Director John Roberts said eliminating the credit was part of the administration’s original plan and continued to be a priority.

State Treasurer Nick Khouri said it was good policy with or without a budget crunch.

“From a pure policy perspective we ought to do it regardless of the budget. But now that revenues are down, I hope there’s even more discussion about addressing insurance premiums,” Khouri said.

Lawmakers are looking to cut $460 million between two budget years as they hammer out their differences on the Fiscal Year 2017 budget. Overall the budget for 2017 will still include more money than the budget for 2016, but not as much as previously projected.

Emily Lawler is a Capitol reporter on MLive’s statewide Impact Team. You can reach her at elawler@mlive.com, subscribe to her on Facebook or follow her on Twitter: @emilyjanelawler.

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