Senators See No Action This Session On Reversing Tax Bill’s Sunset
Now that President Bush has signed the controversial $1.35 trillion tax relief bill, the next question is when will Congress address the unresolved issues created by the legislation–in particular, the sunset provision.
The early evidence is that it will not be anytime soon.
Already, House Majority Leader Dick Armey, R-Texas, and Ways and Means Committee Chairman Bill Thomas, R-Calif., have criticized the sunset provision.
They say they want Congress to eliminate it as soon as possible.
But they are running into a roadblock in the Senate, now under the leadership of the Democratic Party.
Senate Finance Committee Chairman Max Baucas, D-Mont., says the Senate will not revisit the tax bill during the 107th Congress, a position that was confirmed by the Ranking Republican on the committee, Sen. Charles Grassley, R-Iowa.
Doug Bates, assistant vice president with the American Council of Life Insurers, Washington, says that while Congress will have to revisit the sunset eventually, due to the uncertainty it has created, it probably will not happen until the public demands it.
The tax relief bill repeals the estate tax on Jan. 1, 2010. However, because of the sunset provision, the estate tax will go back into effect, exactly as it was before the legislation, on Jan. 1, 2011.
To alter this timetable, Congress will have to enact new legislation.
Bates says reconsideration of the timetable will happen when the public begins raising a hue and cry that the result of the tax relief bill is unworkable in terms of estate planning.
“People will start demanding that Congress revisit the estate tax because planning is a mess. They will complain that they cannot plan in this environment,” Bates says.
Morris Goff, director of government relations for the National Association of Insurance and Financial Advisors, Falls Church, Va., says he believes the new Democratic leadership in the Senate will not want to reexamine the tax bill for political reasons.
Goff says he believes Democrats will instead seek to promote a variety of issues that play well with voters, but then say they cannot be accomplished because there is no money left due to the tax relief bill.
“They think this helps politically in 2002,” Goff says, predicting Democrats will try to put the Bush administration in a box.
Bates says he does expect to see two tax bills emerge during the remainder of the 107th Congress that could be of interest to the life insurance industry.
One bill, he says, will be a minimum wage bill that will include a handful of small-business provisions.
It is possible, Bates says, that this will include some health-related provisions including deductibility of insurance premiums for long-term care coverage.
If the LTC provision is included in the minimum wage package, it has a good chance for enactment, Bates says, but adds that no one really knows what will be in the package at this point.
The other bill, Bates says, will involve “extenders” that will continue certain expiring tax provisions.
One of the expiring provisions is the current treatment of investment income earned by foreign subsidiaries of U.S. financial services firms under Subpart F of the tax code.
ACLI and other financial services firms support the extension.
Bates says he does not believe a one-year extension will be controversial. The fiscal year 2002 budget includes money for a one-year extension, he notes.
ACLI and other financial service firms hope eventually to extend the current treatment permanently.
Bates notes that other tax legislation backed by ACLI was introduced in the Senate last week.
The legislation, S. 992, would repeal Sections 809 and 815 of the tax code. Section 809 is the provision that imposes an additional tax on mutual life insurance companies by reference to the earnings of stock companies.
Section 815 involves certain policyholder surplus accounts that are held by stock companies.
The legislation is sponsored by two senior members of the Finance Committee, Sens. Kent Conrad, D-N.D., and Don Nichols, R-Okla.
Finally, turning to health care, the most immediate impact of the leadership change in the Senate could be on efforts to enact a patients bill of rights.
According to the Washington Post, the new Senate Majority Leader, Sen. Tom Daschle, D-S.D., said that enacting a patients bill of rights is a priority for Senate Democrats.
Daschle said one of the single biggest problems facing the country today is health care, beginning with the role of insurance companies and the role of doctors.
Both Democrats and Republicans support patient bill of rights legislation, but differ over the extent to which health plans can be sued.
The legislation backed by Daschle, S. 283, would allow patients to sue their health plans under state medical malpractice laws over adverse coverage decisions that allegedly cause harm.
A more modest bill backed by the Bush administration, S. 889, would require independent review of adverse coverage decisions, although it would still allow patients to sue health plans under certain circumstances.
While identifying S. 283 as a priority, Daschle did not offer a timetable for consideration of the bill.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.