House Passes Repeal Of Estate Tax; Outlook Dim For Senate Approval
The House of Representatives last week approved permanent repeal of the estate tax, but the legislation is not expected to pass the Senate.
Tom Korb, director of government affairs for the Falls Church, Va.-based Association for Advanced Life Underwriting, says the 264-163 vote for H.R. 8 in the House was not a surprise.
Permanent estate tax repeal consistently has had strong support in the House, Korb says.
However, he adds, he does not see the votes in the Senate for permanent repeal. The increasing budget deficits combined with a variety of other priorities indicates that the Senate will not vote in favor of permanent repeal.
Longer term, Korb says, he believes the trend is toward permanent reform, which he notes is one of AALUs chief goals, rather than repeal.
In the past few years, he says, budget estimates have swung wildly and, in addition, there have been changes in political leadership.
Even if the estate tax were permanently repealed, he says, he is not sure insurance clients could rely on it. Thus, Korb says, the situation is trending more toward reform.
During the House consideration of H.R. 8, Rep. Earl Pomeroy, D-N.D., offered a substitute proposal that would provide for reform rather than repeal.
Under the Pomeroy proposal, the current exemption would be increased to $3 million for individuals and $6 million for couples, and the top rate would be frozen at 49%.
However, the Pomeroy proposal lost by a 239-188 vote.
In other tax news, the life insurance industry is tinkering with its Lifetime Annuity Payout proposal to make it more attractive to certain income groups.
Walter Welsh, senior vice president and director of government affairs for Hartford Life, says the industry is looking at allowing retirees to exclude a certain percentage of annuity income rather than having annuity income taxed at the capital gains rate.
Welsh spoke at the annual Regulatory Affairs Conference sponsored by the National Association for Variable Annuities.
Welsh says an exclusion works better for certain income groups and is seen as “more fair” than the capital gains proposal.
He notes that Democrats in Congress are interested in progressivity. The industry also is examining possibly providing the exclusion for a time period other than lifetime, perhaps 10 or 20 years.
Welsh says there has been a dramatic change in the political environment. Despite the lack of a budget surplus, Republicans in Congress and President Bush are still strongly in favor of reducing or eliminating taxes on savings. This, he says, is not particularly good for annuities and does not create incentives for long-term savings.
Joseph McKeever, a partner in the Washington law firm of Davis & Harman, adds that the Bush administrations proposal to create tax-favored Lifetime Savings Accounts will likely be introduced soon in the House.
(LSAs allow individuals to place up to $7,500 annually in an account, receive tax-free interest and withdraw the money at any time for any purpose without penalty.)
McKeever says that after LSAs were first introduced, the thought was that interest in them had faded.
However, he notes, Pamela Olson, Assistant Treasury Secretary for Tax Policy, is speaking about them again.
Former Budget Director Mitch Daniels called LSAs a “think piece,” McKeever notes, but Daniels is gone and Olson is still there.
“Draw your own conclusions,” he says.
In other news, the House Financial Services Committee is conducting ongoing hearings on reauthorizing the Fair Credit Reporting Act, which is set to expire at the end of the year.
In testimony before the committee, the American Council of Life Insurers urged Congress to reauthorize FCRA because it allows insurers to obtain consumer information that facilitates the availability and affordability of life insurance while protecting the confidentiality of private medical information.
Roberta Meyers, senior counsel with the Washington-based ACLI, says FCRA enables insurers to obtain and share information that is critical to the determination of a consumers eligibility for insurance and the appropriate premium.
At the same time, she says, FCRA provides safeguards to ensure that the confidentiality of highly sensitive medical information will be preserved.
“Insurers believe that FCRA is critical to their business,” Meyers says.
She notes that FCRA acknowledges it is important for insurers to obtain medical information in connection with underwriting insurance and processing claims.
Finally, the House Ways and Means Committee last week approved a Medicare prescription drug benefit by a 25-15 vote.
The legislation, H.R. 2473, would establish a voluntary benefit subject to a $250 deductible. Between $251 and $2,000 in drug costs, the government would pay 80%. In addition, the government would pay 100% of costs after a beneficiarys out-of-pocket expenses reach $3,500.
The premium would be $35 per month.
The legislation now goes to the floor of the House. The Senate also is considering a similar Medicare drug benefit.
The Bush administration has been pressing Congress to pass a drug benefit by July 4.
Reproduced from National Underwriter Edition, June 23, 2003. Copyright 2003 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.