Australian policyholders aren’t the only people being taxed for non-insurance purposes – New York Governor David Paterson proposes to slug policyholders another $US140 million ($212 million) in this month’s state budget.

An official budget tabled for December 16 is set to compel insurers to double their funding of state government services that are not related to insurance. New York insurers currently contribute more than $US340 million ($516 million) to fund the expenses of the New York State Insurance Department.

A preliminary deficit reduction package proposes to lift the proportion of those funds used for other services from $US111 million ($168 million) to $US251 million ($380 million), nudging overall levies close to $US500 million ($755 million).

The New York Insurance Association (NYIA) has slammed the proposal as a “back-door tax” on insurers and policyholders.

NYIA President Ellen Melchionni says the money should come from general tax revenue.

“Raising taxes on any business in the middle of a deep recession is always a bad idea, but using a hidden tax, such as these sub-allocations, takes a bad idea and makes it even worse,” she said.