Industry Reacts To President Bushs State Of The Union Address
Annuity dividends should be treated the same as stock and mutual fund dividends under any proposal to eliminate the dividend tax, says the new president of the American Council of Life Insurers.
“A level playing field is essential,” former Oklahoma Governor Frank Keating says.
Keating spoke to National Underwriter following President Bushs State of the Union message last Tuesday.
Keating says life insurers do not oppose the presidents proposal to eliminate the tax on dividends. Indeed, he says, the president is on the right track in encouraging economic growth by eliminating the tax.
But he says ACLI will work to assure that annuity dividends are treated the same as dividends on other financial products, such as stocks and mutual funds.
This is particularly important for older Americans, Keating says, who need to preserve their savings throughout their retirement years.
In addition, Keating says, ACLI will use the debate over the tax on dividends to advocate its Lifetime Annuity Payout proposal. “When something is on the table, everything is on the table.”
Any discussion of retirement issues and the tax treatment of dividends is an appropriate time to discuss how life insurance products will be treated under the tax code, he says.
Under the LAP proposal, retirees who choose to receive their retirement savings in the form of an annuity would be taxed at the capital gains rate instead of the individual income rate.
In addition, long term care insurance and life insurance company tax issues should be part of the upcoming tax debates, Keating says.
Turning to another major issue that was not part of the presidents speech, optional federal chartering of insurance companies, Keating says that as a former governor, he generally believes having 50 “hot houses” of experimentation is usually the way to go.
But he says the life insurance industry is in competition with other financial services industries. If the securities industry can get much more prompt product approval, Keating says, it harms life insurers.
The real issue, he says, is fair and prompt decision-making.
Returning to the State of the Union speech, the presidents comments on health care reform are drawing starkly different reactions.
Donald Young, president of the Health Insurance Association of America, Washington, says the president laid out a clear vision for making health care more available and affordable.
In his speech, the president criticized a nationalized health care system and instead said the nation must work toward a system in which all Americans have a good insurance policy and choose their own doctors.