One of the proposals
under consideration to generate revenue, as part of a solution to eliminate the
budget deficit, is a fire insurance surcharge (ABX8 36,
Ma), which nearly everybody concludes is a tax.
The state of
Victoria in Australia (the state includes Melbourne and surrounding areas) has
imposed a fire insurance tax and is discovering unintended consequences.
Noel Pietersen, chief executive of the Insurance Brokers
Association of Australia, said a number of people cancelled their fire
insurance after the tax went up. He said the tax is "unfair," as
people who don't pay the tax get the same fire service as those who do. (Cal-Tax: It is this feature of the
proposed California fire insurance surcharge that clearly makes it a tax.)
Dr. Kevin Tolhurst, senior lecturer in fire ecology at the University
of Melbourne, said about 30 percent of property owners don't have fire
insurance – for various reasons, including added cost for the same service
cited above, and because of the feeling that the government will bail out the
victims of a fire disaster.
On a very hot (115
degrees in Melbourne) February 7, 2009, the worst fire disaster to hit
Australia occurred, as a series of brush fires were ignited in the rural
regions north of Melbourne. The "Black Saturday" fire killed 173
people and destroyed 3,500 structures. The unintended consequence of the fire
insurance tax was that many people were not insured when this disaster hit.
(Cal-Tax: To what extent will
Californians drop their fire insurance if the proposed tax is imposed? One
would presume that the demand is not totally inelastic.) (Source: BBC World Service: Business Daily,
February 4.)
Cal-TaxReports, February 16, 2010
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