HB 2517 proposes exempting the Texas Windstorm Insurance Association (TWIA) and the Texas FAIR Plan Association (TFPA) from paying two specific taxes: the property and casualty premium tax and the maintenance tax on insurance. These taxes are currently paid by all insurance providers operating in Texas and contribute to funding state regulatory oversight (via the Texas Department of Insurance) and public services such as education through the Foundation School Fund. TWIA and TFPA are state-created, nonprofit insurers-of-last-resort that provide coverage in high-risk areas—such as coastal zones and inner cities—where private insurers often decline to write policies.
While the bill’s proponents argue that this tax exemption would free up funds for TWIA and TFPA to use toward claim payments and reduce their reliance on expensive reinsurance, these goals come at a significant cost to the rest of the state. According to the Legislative Budget Board, the exemption would reduce state revenue by nearly $28 million over the next two years and by nearly $87 million over the next five years. This lost revenue must be replaced from general tax funds to maintain support for public services, most notably education. That effectively shifts the financial burden onto Texas taxpayers, who will be asked to fill in the gap created by relieving TWIA and TFPA of their tax obligations.
In addition, the bill undermines principles of free enterprise and market fairness. TWIA and TFPA, though established to serve underserved markets, still sell insurance in competition with private carriers. Exempting them from taxes that private companies are still required to pay gives these government-backed entities an operational cost advantage, distorting the market and potentially pushing out private competitors. This not only discourages innovation and investment from private insurers in high-risk markets but also sets a precedent for expanding government-run entities under favorable rules, contrary to the principle of limited government.
The bill also creates an inequity within the insurance industry. While it eliminates the maintenance tax obligation for TWIA and TFPA, that tax is based on a cost-recovery model—meaning the total amount to be collected does not change. Instead, other private insurers will pay more to make up for what TWIA and TFPA no longer contribute. This is a clear redistribution of financial responsibility from public entities to private businesses and their policyholders, functioning as a form of hidden cost collectivization.
Though HB 2517 does not increase regulatory burdens on individuals or businesses in the traditional sense, it shifts regulatory and financial pressure away from state-run entities and onto the broader insurance market and general public. It grows the scope of government influence by enabling TWIA and TFPA to expand their reach without contributing their fair share to regulatory or public funding systems. In effect, the bill rewards public entities by giving them a pass on obligations borne by everyone else, increasing dependency on public subsidy and reducing fiscal accountability.
Given these substantial fiscal, economic, and philosophical concerns, House Bill 2517 cannot be supported under core liberty principles. It expands government favoritism, increases the collective burden on taxpayers and private insurers, distorts the free market, and undermines accountability. Texas Policy Research recommends that lawmakers vote NO on HB 2517.
Individual Liberty: HB 2517 does not directly restrict or expand individual freedoms. However, there is a slight negative downstream effect: if public insurance programs are further subsidized and private insurers are crowded out, individuals may eventually face fewer choices in the insurance market, particularly in high-risk areas. That outcome, though indirect, could limit consumers’ liberty to select from a diverse range of providers.
Personal Responsibility: By exempting TWIA and TFPA from premium and maintenance taxes, HB 2517 gives them a structural advantage over private insurance companies. These taxes, especially the maintenance tax, are still required of private carriers. Because maintenance taxes are used to fund the regulatory apparatus governing all insurers, exempting public entities shifts their share of costs to private firms, essentially forcing competitors to subsidize government-backed programs. This distorts the market and discourages private competition—especially in already risky or thinly served areas like coastal Texas. A truly free market depends on fair and equal application of rules and costs, which this bill disrupts.
Free Enterprise: A key tenet of personal responsibility is that all actors—whether individuals, businesses, or government entities—should be accountable for the financial consequences of their operations. By relieving TWIA and TFPA of standard tax liabilities, HB 2517 reduces their responsibility to carry their fair share of regulatory and social costs. Instead, that responsibility is transferred to the public (through lost revenue) and to private insurers (through increased tax burden). This undermines fiscal responsibility and creates a precedent of insulating state entities from market accountability.
Private Property Rights: On the one hand, TWIA and TFPA exist to protect property owners who cannot find affordable insurance in the private market, which arguably supports property ownership in vulnerable regions. On the other hand, a financially imbalanced or state-favored insurance system can increase systemic risk or lead to underpricing and underfunding of catastrophic risk—undermining long-term property protection. The exemption might help these entities pay more claims in the short term, but it could erode the sustainability of property protection in the long run if it weakens market discipline.
Limited Government: HB 2517 expands the role and privilege of state-created entities—TWIA and TFPA—by exempting them from taxes that private sector competitors must continue to pay. While it doesn't grow government bureaucratically (no new agencies or regulations), it expands the scope of state influence in the insurance market. Instead of encouraging self-sufficiency or fiscal restraint, the bill reinforces reliance on state-sponsored insurance by shielding these entities from financial obligations. This shift away from a level playing field is at odds with the principle that government should be minimal, neutral, and restrained in its market role.
