Life insurance agents hope that legislation enacted by Congress in the closing days of 2001 will help spur new investments in life insurance.
The legislation, H.R. 1088, reduces a variety of taxes on those who invest, directly or indirectly, in the stock market.
In particular, the legislation reduces a federal tax that is imposed when stocks are sold. House Financial Services Committee Chairman Mike Oxley, R-Ohio, notes that this tax affects everyone who owns an equity investment.
These equity investments, he notes, include certain life insurance policies, private retirement plans, 401(k) plans and mutual funds.
“This is a major victory for American investors,” Oxley says. “For too long, the government has been making money hand over fist at the expense of American investors long-term growth.”
David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., says NAIFA fully supports H.R. 1088 and he praises Congress for enacting it into law.
The legislation, Winston says, will reduce the unnecessary tax on capital and investment and create incentives for Americans to save and invest.
According to the Financial Services Committee, investors currently pay some $3 million per trading day in excess transaction fees.
The original purpose of the fee, the committee says, was to fund the Securities and Exchange Commission.
However, due to unexpected increases in trading volume, fee revenue exceeds the budget of the SEC by a significant and growing margin, according to the committee.
Indeed, the committee says, the SEC is now funded at more than six times its budget. The excess money, the committee says, goes to pay for other Washington programs.
The committee estimates that the legislation will save American investors $14 billion over 10 years.
H.R. 1088 is now on President Bushs desk awaiting his signature. He is expected to sign the bill shortly.
Meanwhile, the failure of Congress to enact an economic stimulus package is causing a serious problem in the life insurance industry.
Included in the legislation that was passed by the House but which died in the Senate, H.R. 3529, was a provision extending for five years the 2001 tax treatment of investment income earned by foreign subsidiaries of U.S. financial services firms under Subpart F of the tax code.
Under the 2001 rules, the income was not subject to U.S. tax until received by the parent. But due to the failure of Congress to extend this treatment, the income is immediately taxable when earned by the subsidiary.