Member Alert! Car Insurance Tax Increase Introduced in State House

March 21, 2016

As previously reported, the Snyder Administration and some House lawmakers are calling for measures that would result in a car insurance tax increase on law-abiding Michigan drivers. Unfortunately, two bills (House Bills 5457 and 5458) were introduced last week that would repeal important tax provisions that help defray the costs of providing health care to individuals who have been injured by an uninsured driver. The Michigan Chamber is strongly opposed to these bills.

Michigan’s auto no-fault insurance system provides some of the most expensive coverage in the nation. Unfortunately, the high cost of insurance means that many drivers are either unable or  unwilling to purchase coverage yet continue to drive illegally. Michigan’s weak enforcement means that more and more drivers are flouting the law, and sadly, some cause accidents to innocent bystanders. Even if these innocent bystanders themselves have never purchased auto insurance, they are provided the most expensive health care coverage. The “assigned claims” tax credit utilized by Michigan-based insurance carriers allows these costs to be socialized to all Michigan taxpayers. If HB’s 5457 and 5458 are passed, however, the only ones who will be picking up the tab for covering these innocent bystanders will be law-abiding Michigan drivers in the form of higher premiums, a car insurance tax. 

The Michigan Chamber is disappointed that increasing costs is the proposed course of action, despite other options. The Governor’s proposed budget, of more than $54 billion, is the largest in history. Further, revenues are coming in more than $500 million higher than expected. This tax increase is unnecessary. It is also ironic that just last year legislators and Gov. Snyder moved at warp speed to pass a tax break, possibly worth hundreds of millions of dollars, to an out-of-state Las Vegas company, yet now they are proposing to increase costs on Michigan businesses. This just doesn’t make sense. 

All is not lost, however. The Michigan Senate has taken bold action to reform Michigan’s no-fault insurance system and actually address the root cause of the problem, which is artificially high insurance rates. We suggest the best course of action is for all stakeholders to continue working on the Senate reforms together to reduce costs for all Michigan drivers.  

For more information on this issue, or other related tax issues, please contact Tricia Kinley at tkinley@michamber.com.