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The Effect of Insurance Premium Taxes on Interstate Differences in the Size of the Property-Casualty Insurance Industry

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  • Martin F. Grace
  • David L. Sjoquist
  • Laura Wheeler

Abstract

States levy insurance premium taxes, which are essentially gross receipt taxes on premiums, with insurers paying the higher of the tax rate in the state in which the company is domiciled and the state in which the policy is written. Using a state-level panel data set from 1996–2010 for the property-casualty insurance industry, the paper explores the effect of insurance premium tax rates on interstate differences in property-casualty insurance industry employment and other measures of industry size. While the estimated elasticities of industry size with respect to the tax rate differ across models, the results indicate that the insurance premium tax has a large, negative, and economically significant effect on the size of the insurance industry in a state.

Suggested Citation

  • Martin F. Grace & David L. Sjoquist & Laura Wheeler, 2014. "The Effect of Insurance Premium Taxes on Interstate Differences in the Size of the Property-Casualty Insurance Industry," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 151-182, March.
    • Handle: RePEc:ntj:journl:v:67:y:2014:i:1:p:151-182
    DOI: 10.17310/ntj.2014.1.05
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    References listed on IDEAS

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    Cited by:

    1. Martin F. Grace & David L. Sjoquist, 2020. "The Effect of Taxes on the Location of Property‐Casualty Insurance Firms," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 1035-1062, December.
    2. Martin F. Grace & David L. Sjoquist, 2019. "Do Property–Casualty Insurance Firms Locate to Minimize Insurance Premium Taxes?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 22(1), pages 101-125, March.

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