As President Obama prepares for a second term, the prospect of a “fiscal cliff” forces the White House, Congress and the American people to finally focus on our nation’s most serious challenge: a struggling economy.
One can wish our president the best and hope that he is able to grasp the severity of our fiscal situation and take concrete steps – and work with Congress – to address not only the immediacy of the fiscal cliff, but the long-term consequences of our current economic woes. Unfortunately, finding a long-term solution has not been on Mr. Obama’s agenda.
And now the president is obtaining the viewpoint of some of the nation’s top CEOs (among them Aetna’s Mark Bertolini, who said his firm could lay off workers if the fiscal crisis isn’t solved) to help avoid further crisis. But he did the same thing in 2009, calling a panel of top CEOs, addressing them, then promptly ignoring their recommendations. Perhaps this time he will listen and to take action.
Regardless of what action he takes, it is a given that it will include additional “revenue” sources. Meaning, more taxes.
What better target than individual and corporate-owned life insurance survivor benefits for a new tax? The benefits are currently untaxed and, as Mr. Obama would likely point out, used by the “wealthy” as part of estate preservation strategies.
There is more than $18 trillion of individual and group life insurance in force in the U.S. today, with tax-free payments to beneficiaries approaching $60 billion each year.
That’s a heck of a lot of money. Especially when the president has been able to make the argument that families earning $200,000 or $250,000 (take your pick based on his past comments) are “rich.” It would not be hard for him to argue that life insurance proceeds from, say, a parent or grandparent who passes away, should be taxed. It would be only “fair,” the president might tell us.
Both presidents Jimmy Carter and Ronald Reagan proposed taxing life insurance and the passive accumulation of growth through annuities back in the 1970′s and 1980′s. The life industry opposed and successfully lobbied against such laws, and they never came to pass. But the situation in Washington today shows that we have leaders who use forceful tactics and sometimes constitutionally challenged tactics to change things as they see fit, whether it be related to immigration laws, underground gas and oil extraction, funding of “green” energy initiatives, or voting on hotly debated legislation without proper vetting or even reading the proposal — “We must pass the bill so you can find out what is in it.”
The Obama Administration and Democrats did a masterful job of passing the Patient Protection and Affordable Care Act (PPACA) with no input whatsoever from Republicans or, for the most part, health insurance experts who saw the danger in the law but could have offered alternatives.
With a Supreme Court that spoke out of both sides of its mouth (the penalty for not having health insurance is a tax and is not a tax) in ruling Obamacare constitutional, and the assumption that his re-election was a mandate from the American people to proceed as he sees fit, it seems a no-brainer that Mr. Obama would put life insurance proceeds squarely in his crosshairs.
Remember when President Obama suggested for his proposed 2010 and 2011 federal budgets that the U.S. institute taxes on proceeds from corporate-owned life insurance? Probably not, because his proposal didn’t get much press outside of the industry and, (surprise, surprise!) he and Congressional Democrats neglected to even pass a budget those years, even though they controlled both houses in Congress. And the White House.
Back then, the only groups that voiced opposition were insurance carrier and agent trade groups.
Most of the coverage was through industry trade press, such as this website.
Mainstream press coverage? Cue the mock cricket noise: “chirp, chirp.”
Town hall meetings became almost violent as Americans voiced their displeasure with health care reform, and similarly a majority of citizens were outraged when Obama and Congress enacted Obamacare behind closed doors.
The country still remains divided, while health insurance premiums continue to rise and doctors will stop treating Medicare patients as a result of Obamacare cuts. And, in some places such as Washington, D.C., health insurance agents and brokers are actually being shut out of the individual market.
But still, the law is the law.
If Mr. Obama seeks to tax life insurance survivor benefits, whether with a tax for all proceeds, or by dividing the “haves” and the “have nots” with a tax on benefits above a certain level of proceeds, say, $1 million or above (when used as an estate preservation tool), there will not be the reaction as there was with Obamacare.
And a tax on life insurance survivor benefits could become law.
Based on the health insurance industry’s success at battling health reform, we should worry. The efforts to stop Obamacare did not pay off for health insurance trade groups. But now we have the past to see how President Obama might act in the future.
Forewarned is forearmed. It’s coming, sooner or later. If the taxation of life insurance survivor benefits becomes a goal for the president, we need only look at Obamacare to know how it will turn out.
That’s my take.
With Obama re-elected and fiscal cliff, will life insurance be taxed? via IFAwebnews.com .
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