Beautiful river and coastal areas are often expensive places to live and few can afford high priced “beachfront” property for their primary residence or cottage.  Wind damage and flooding are obvious risks and the cost of insurance against those risks is far higher than elsewhere.  We extend our best wishes to those lucky people who can afford locating in such desirable areas.

But along comes Congress considering a tax for fixing the inevitable wind and flood damage to pricey beachfront properties.

The bill, ironically coined the Homeowners and Taxpayers Protection Act of 2013 (H.R. 1101) and introduced by Congressman Sires, siphons away billions of dollars from insurance consumers across the country and uses these dollars to create a new national insurance fund.  Bureaucrats could then choose to give the money in selected states for coastal rebuilding and public education, including reconstructing in regularly stricken catastrophe-prone areas.  H.R. 1101 is a tax designed to preserve the private joy of beach living while getting other consumers to pay the inevitable cost of recovery after storms.  Think of it this way:

  • Building in a catastrophe-prone area is dumb.
  • Frequently rebuilding in the same place is crazy
  • Conning a sucker to pay for your folly – priceless!

Some beach residents and some in the catastrophe recovery business will see the beauty in this attempted con.  In fact, some coastal states have a tradition of looking for ways to spread their catastrophe costs to consumers living as far into dry lands as possible.  For example, Florida has a poor history of aligning actuarial costs with insurance premiums – pushing higher costs to lower-income consumer and those who live inland to makeup the financial shortfalls of state-run insurance programs.  This national plan will do the same only on a national scale.

To predict success or failure of such a national insurance fund, you only have to look at the current National Flood Insurance Program (NFIP).   According to a General Accountability Office report, most NFIP policies are priced below water (so to speak).  Pre-Sandy, the fund collected $3 billion in premiums each year, but owed the U.S. Treasury $18 billion.  So much for taxpayer protection.

In fact, the NFIP program is well-known for its bureaucratic senselessness — repeatedly rebuilding the same damaged properties, again and again.  One home, worth $70,000, filed 34 claims totaling $668,000 over a 32-year stretch.  Maybe these homes should not be rebuilt or maybe they should be rebuilt to withstand storm damage.  Instead, the program is too carefree about paying taxpayer money.

The proposed national fund would be worse, because its funding would come from some consumers that have no coastal exposure and no responsibility for mitigating risk along the beach.

The result encourages development along fragile coastal environments that serve as natural storm barriers.  Furthermore, encouraging development along hurricane exposed coastal areas only serves to raise consumer prices for insurance by putting more property and lives at risk.  Pushing these costs to consumers in other states only exacerbates this problem, by making coastal development insensitive to risk.

In short, this plan will raise consumer insurance prices for all and ultimately put taxpayers on the hook for another bailout.  Where is the taxpayer protection?

If implemented, H.R. 1101 would be another big government program and it would be a losing proposition for both consumers and taxpayers.  It’s a beach house bailout, pure and simple.

Alan Daley and Steve Pociask write for the American Consumer Institute Center for Citizen Research.  For more information, visit    

This article was published in the Huffington Post on 3/22/2013 and can be downloaded here.