State X's premium tax rate is 2 percent.State Y's premium tax rate is 3 percent.State X insurers are required to pay the 3 percent rate on business written in State Y.State X requires insurers from State Y to pay a 3 percent premium tax on business written in State X,even though the premium tax rate is only 2 percent in State X.This practice is known as a

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The practice described is known as a retaliatory tax law, where a state imposes taxes or fees on businesses from another state that are higher than what they would pay in their home state as a way to retaliate against that state's treatment of their own businesses. In this case, State X is retaliating against State Y by requiring them to pay a higher premium tax rate than what they would normally pay in their home state.

State X's Premium Tax Rate Is 2 Percent