ETR also is modified to assess the sensitivity of tax avoidance to insurance lines. EASYETR is ETR for the insurers writing greater than 75 percent of their business in lines other than automobile, farm, fire, home, and workers’ compensation and zero for other insurers. Specifically, these insurers concentrate their business in liability, medical malpractice, reinsurance, and credit and surety lines. EASYETR’s coefficient is expected to be negative, consistent with increased tax management in lines with more opportunities for Schedule T crossstate allocations. The first four lines involve insured property confined largely to a single state. Workers’ compensation is the most tightly regulated line of insurance. In fact, some states require its purchase from state workers’ compensation funds. Consequently, insurers have limited opportunity to allocate workers’ compensation insurance across states. payday loans online no credit check

The second set of tax measures provides more precise segregation of premium tax and income tax effects. They are the statutory premium tax rates (PREMRATE) and income tax rates (INCRATE) applicable to each property-casualty insurer-state. To the extent tax bases and tax credits vary across states, statutory tax rates measure marginal tax rates with error. A casual review of state tax systems suggests that states vary considerably along both dimensions. In particular, 16 states provide rate reductions if insurers invest substantially in state securities, employ state residents, establish regional offices in the state, etc. If the insurer is incorporated in the state, we assume the insurer qualified for the most favorable tax rate available. In all other cases, we assume the insurer did not qualify for any rate reduction.