As Senate Rejects Estate Tax Repeal, Proponents Vow To Fight On
The Senate vote last week against permanent repeal of the estate tax probably ends consideration of the controversial issue for the rest of the year, industry representatives say.
The effort to permanently repeal the estate tax ended when proponents fell six votes short of the 60 needed in the Senate to approve a repeal measure. The Senate vote was 54-44.
“In reality, the Senate vote was the last shot this year for those who want estate tax repeal at all costs,” says David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va.
It is clear, Winston says, that since June of last year, the proponents of repeal lost significant traction.
But supporters of repeal vow not to give up the fight.
The outcome in the Senate was not a surprise, given that 60 votes were needed for permanent repeal, says Maria Berthoud, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America, Alexandria, Va.
However, she says, the fact that 54, or a majority of Senators, support repeal is encouraging. “We will be back at some point, sooner or later,” Berthoud says
Under current law, the estate tax will phase out on Jan. 1, 2010. However, due to a sunset clause in the phase out legislation, the estate tax will return on Jan. 1, 2011.
It was unclear at press time whether Congress would now take up efforts to reform, rather than repeal, the estate tax. Much of the media speculation was that both Democrats and Republicans would spar over the issue in the upcoming Congressional elections.
Winston says he believes senators considered the issue of repeal in light of the resumption of budget deficits, the need to enhance homeland security, the desire to provide Medicare beneficiaries with a prescription drug benefit, and other more pressing concerns.
NAIFA, he adds, supports significant reform of the estate tax so that more than 99% of Americans would not be subject to it.
In other news, a House Financial Services Committee panel continued its examination of optional federal chartering of insurance companies, and raised the possibility of a life insurance-only system.
The discussion came as representatives of the American Council of Life Insurers, Washington, and a major property-casualty association, the National Association of Independent Insurers, Des Plaines, Ill., acknowledged the significant differences between the life insurance and p-c insurance industries.
Joseph J. Gasper, president of Nationwide Financial Services, Columbus, Ohio, who represented ACLI, calls the current regulatory system, a “competitive albatross” for life insurers.
The system was designed, he says, when the life insurance industry was much different than today. Life insurers no longer focus simply on traditional life insurance products, according to Gasper.
The business today is about retirement security and long-term savings, he says, meaning that life insurers must compete against banks, mutual funds and securities firms.
But these competitors have an advantage over life insurers in that they can bring new products to market quickly, Gasper says, while life insurers may have to wait 18 months or more to get a product approved in all jurisdictions.
And even then, he says, tweaking a product to meet local variations in laws and regulations often transforms a single, national product into 30 or more different products.
“The current system is not designed to accommodate national companies, and it doesnt,” Gasper says.
Tony Nicely, chairman of GEICO, an auto insurer located in Washington, D.C., says he understands Gaspers concerns, even though his company and the association he represents, NAII, oppose optional federal chartering for p-c companies.
Indeed, Nicely says, while he cannot speak for NAII on the specific issue of a life insurance-only system, he personally would not oppose it.
“I can see Mr. Gaspers arguments,” Nicely says.
But Nicely says OFC would not work for p-c companies because it would weaken the data pool small and medium-sized companies rely on for rating.
In addition, he says, differences in geography and underlying tort laws in the states mean that customer needs for p-c insurance differ from state to state.
Gasper did not address the issue of a life insurance-only system directly. He notes, however, that Nationwide is also a major provider of p-c insurance.
Nationwides view, both on the life side and the p-c side, is for the choice offered by OFC, Gasper says.
Finally, a major p-c agent group, the Council of Insurance Agents and Brokers, Washington, last week filed lawsuits in Florida and Nevada seeking to overturn their state countersignature laws.
The lawsuits argue that countersignature laws violate certain federal constitutional protections that prohibit states from discriminating against residents of other states.
State countersignature laws require non-resident agents to obtain the signature of a resident agent on an insurance policy, for which the non-resident agent must usually split the commission.
Winston says NAIFAs official position is opposition to countersignature laws.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 17, 2002. Copyright 2002 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.