Dick Gephardt has been attacking Howard Dean for giving “huge tax breaks” to Enron while cutting aid to Vermont ’s poor. But Gephardt has failed to show that Enron got any special treatment. The inducements that Dean approved for setting up so-called “captive” insurance companies were available to any corporation, not just Enron. And far from hurting the state’s poor, revenue increased. In fact, taxes and fees from from Vermont’s “captive” insurance companies more than doubled.
There’s nothing secret about Vermont ’s desire to entice big corporations to set up tax-advantaged “captive” insurance companies in the state. In fact, the Vermont Web site advertises the fact and calls the idea “simply captivating.”
These “captives” allow corporations to provide their own insurance rather than purchasing it elsewhere, while still getting a tax deduction for the premiums the parent pays to its own company. The world’s most popular havens for these captive insurance companies are offshore – Bermuda and the Cayman Islands . But Vermont started going after this business for itself 20 years ago – long before Howard Dean became governor.
The Boston Globe reported Dec. 12 that Enron is among the corporations that set up a captive in the state after Dean signed a 1993 bill cutting state taxes on the premiums paid to the captives. Gephardt started attacking Dean on the issue on the same day, issuing a news release in which he said Dean “balanced the budget by making deep cuts to prescription drug programs for seniors, Medicaid, public education, the blind and the disabled to give a tax windfall to companies like Enron.”
A week later Gephardt railed at Dean again for giving “windfalls” to “corporate criminals”. And on a separate Web site devoted exclusively to criticizing Dean, the Gephardt campaign posted a document putting the claim starkly: “It’s a Matter of Values: Enron or the Needy?”
But Gephardt gets it wrong: the state balance sheet shows Vermont gained revenue after Dean’s supposed “giveaway.” After Dean signed the 1993 tax cut the total taxes and fees collected from captive insurance companies more than doubled, from less than $9 million in 1992 to more than $19 million last year, according to Dan Towle, Director of Financial Services of the Vermont Department of Economic Development. A slight drop in revenue (about 2%) in the first year or two was quickly made up by the growing volume of captive insurance business attracted to the state, which saw the total number of captives more than double from 257 at the end of 1992 to 597 at the end of last year. Some “givewaway.”
Neither Gephardt nor anybody else has produced evidence that Enron got any special favors. And Dan Towle – the state official now in charge of the program – denies that Enron got anything more than any of the other 596 sponsors of Vermont captives. “To my knowledge, all captive programs pay at the rates disclosed in the law without exception,” Towle said in an e-mail to FactCheck.org.
Gephardt also criticizes Dean for attacking President Bush’s ties to Enron in an Iowa TV ad, calling that “gross hypocrisy”. That’s an opinion to which Gephardt may be entitled. But Gephardt’s claim that Dean shortchanged Vermont’s poor in order to give favors to Enron just isn’t backed up by the facts.
Michael Kranish “For Dean, ‘captive’ insurance a VT. boon” Boston Globe 12 Dec. 2003 : A1.
Dick Gephardt for President, news release “Gephardt statement on Dean tax breaks for Enron” 12 Dec. 2003.
Michael Kranish “As governor, Dean signed bill that aided offshore insurers” Boston Globe 19 Dec. 2003.
Dick Gephardt for President, news release “Dean doubletalk on Enron on air in Iowa” 19 Dec. 2003.
Dick Gephardt for President, Web site item posted on DeanFacts.com, “It’s a Matter of Values: Enron or the Needy?” undated.
Vermont Department of Economic Development, “Captive Insurance: Vermont’s Captive Stats” undated posting on ThinkVermont.com (updated by updated figures supplied to FactCheck.org by Dan Towle, Director of Financial Services).
Vermont Department of Economic Development, “Captive Insurance: Simply Captivating” undated posting on ThinkVermont.com.