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.
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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Even if the estate tax were permanently repealed, he says, he is not sure insurance clients could rely on it.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.