Abstract
AbstractStates levy insurance premium taxes, which are essentially gross receipt taxes on premiums, with insurance companies 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 firm‐level data for the property–casualty (P‐C) insurance industry, we estimate the extra insurance premium tax that P‐C insurance firms pay by not locating in the state that minimizes their insurance premium taxes. We find that only 4.78 percent of P‐C firms are located in the state that minimizes their insurance premium taxes. We explore the relationship between the extra tax paid and other factors that are thought to be associated with firm location choice. We find that P‐C firms appear to trade off higher taxes to locate in a state that is more urban.
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