HARTFORD, Conn. -- Governor Dannel P. Malloy announced Monday that next week's state budget proposal will include a reduction in the tax rate on insurance premiums.
The plan will reduce the current rate of 1.75 percent to 1.5 percent. The Governor said lowering this tax rate will continue the state’s efforts to improve the business climate for insurers located across Connecticut, which account for more than 58,000 jobs in the state.
“There are simple and relatively inexpensive ways we can improve the business climate by making state government more predictable and sustainable,” Gov. Malloy said. “The insurance industry has a long and storied history in Connecticut, and we must ensure that we maintain our competitive edge so that they continue to thrive and grow in our state.
"Restructuring and lowering the premium tax will substantially improve market conditions for Connecticut-based insurance companies,'' Malloy added. "This change will save them millions in taxes paid to other states across the country.”
By lowering the insurance premium tax rate to 1.5 percent in Connecticut, the liability for Connecticut-based insurers conducting business in states with lower tax rates will be significantly reduced.
Under the Governor’s proposal, the costs of lowering the tax rate – $22 million – will be covered by limiting use of tax credits that companies may apply against premiums tax liability.
This proposal makes Connecticut a more competitive state for the insurance industry by moving to match the lower rates in some other states.
However, if an out-of-state insurer is writing a policy in Connecticut and the insurer’s home state has a higher premium tax rate, then that insurer will continue to pay the higher premium tax rate to the State of Connecticut.