By Daniel A. Horwitz
The American insurance industry is unique in many ways. Included among its quirks is an interlocking, state-by-state “retaliatory tax” framework that ensures that equally low taxes will be levied on insurance companies across the country no matter where they do business. The gist of this “retaliatory tax” system is that if one state decides to impose a comparatively more onerous tax on insurance companies, then every other state will punish that state’s insurance companies by imposing a retaliatory tax against them in response. With the sole exception of Hawaii, every state has enacted a retaliatory insurance tax statute for this purpose.
To illustrate the practical effect of this framework by way of example, suppose that Alabama and Tennessee each tax insurance companies in exactly the same way, and further, that some number of Alabama insurance companies do business in Tennessee (and vice versa). To close a budget deficit, however, Alabama decides to raise taxes on insurance companies that do business in Alabama. Thereafter, in response, Tennessee’s “retaliatory tax” statute authorizes Tennessee’s insurance commissioner to levy a punitive tax on all of the Alabama insurance companies that do business in Tennessee. Additionally, every other state (except Hawaii) would punish Alabama’s insurance companies in exactly the same way. Considered broadly, this practice has been described as “holding hostages to coerce another sovereign to change its policies.” Continue reading Five Pennsylvania insurance companies recoup $16 million in tax payments after Tennessee Supreme Court holds that retaliatory taxes were improperly assessed
By Daniel A. Horwitz
On August 6, 2015, Davidson County voters will head to the polls to vote on Metro Charter Amendment 3, which has been dubbed the “local hire” amendment. If enacted, the crux of Amendment 3 is that 40% of the work performed on taxpayer-funded construction projects within Davidson County would legally have to be set aside for Davidson County residents.
In recent weeks, opposing advocates have expressed their views on Charter Amendment 3 in editorials published in The Tennessean. First, on June 22, 2015, union organizer and community activist Ashford Hughes penned the op ed: “[A] Vote for Charter Amendment 3 is [a] vote for local jobs,” in which he argued – among other things – that “[i]t makes no sense to bring in out-of-county and out-of-state hires when so many Nashville construction workers, engineers and skilled tradesmen and women are out of work.” Making the contrary case, on June 30, 2015, Nashville Area Chamber of Commerce President Ralph Schulz penned the op ed: “Vote no on Amendment 3: It sounds good, but won’t work,” contending that the measure “would translate to longer delays on Metro construction projects and more money coming out of taxpayers’ pockets.” Various other interested parties have also weighed in on the matter in recent days, disputing the referendum’s likely policy ramifications.
What has largely flown under the radar to this point, however, are the constitutional implications of the proposed local hire amendment, which are substantial. The text of the proposed amendment is a doozie, but in full, it reads as follows: Continue reading Does the Constitution prevent Nashville from enacting a local hire law? Yes, it probably does.