The budget Gov. Dannel Malloy unveils next week includes a tax break designed to help improve the business climate for Connecticut insurance companies.
Malloy’s office announced a proposal Jan. 30 to lower the tax rate on insurance premiums from 1.75% to 1.5%.
It will be included in the two-year budget he unveils to a joint session of the General Assembly on Feb. 8.
He said the move will save the state’s insurers $11 million next fiscal year and $22 million the following year.
The state will cover that loss by limiting the use of tax credits that companies may apply against premiums tax liability.
“There are simple and relatively inexpensive ways we can improve the business climate by making state government more predictable and sustainable,” Malloy said in a statement.
CBIA president and CEO Joe Brennan said Connecticut was home to six of the country's top insurance companies, with the industry employing more than 58,000 people and contributing about $20 billion annually to the state's economy.
"The governor's proposal will reduce overall costs here,'' Brennan said. "It's a step in the right direction.''
Malloy said 49 states and Washington, D.C., tax insurance premiums at rates ranging from 0.5% to 4.35%.
If an insurer does business in two states, it pays the higher premium.
Lowering the rate impacts costs because the liability for Connecticut-based insurers operating in another state with a lower tax rate will be significantly reduced.
“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,” Malloy said.