The variable annuity industry should be wary of the Bush administrations tax agenda, which could make annuities a much less attractive product, says Rep. Earl Pomeroy, D-N.D.
Already, he says, annuities have suffered from the administrations tax policies because of the failure of the most recent tax bill to pass through the dividend tax deduction to annuities.
Pomeroy, who spoke to the annual Regulatory Affairs Conference sponsored by the Reston, Va.-based National Association for Variable Annuities, notes that his views may be seen as those of a Democrat speaking to a largely Republican audience.
However, Pomeroy says, he believes the administrations agenda is to eliminate completely all taxation on investments and put the entire burden on wage earners.
That, he says, is not good for annuities.
Consider, he says, what happened on the dividend tax reduction. The first version of the proposal did not pass the tax reduction through to annuities, he notes.
However, Pomeroy says, Treasury Secretary John Snow promised that the industrys concerns would be resolved through a “technical correction” that would be inserted in the bill sometime during the legislative process.
But it did not happen, he says. “You are due a tax incentive. You were promised one and didnt get it.”
Beyond that, Pomeroy says, the administrations retirement savings proposal, which would create a variety of new tax-favored savings accounts, would completely eliminate the competitive edge of annuity products.
There is a need for insurance products that protect against the risk of living too long, Pomeroy says, but the Bush administration pays no heed to that need.
Pomeroy adds that Bush has been “cleaning up” with his legislative agenda, noting that Congress approved a $350 billion tax reduction pushed by the administration despite the budget deficit.
While he may not agree with the administrations agenda, Pomeroy says, the administration has been very effective in getting it enacted.
Turning to the issue of corporate governance, Pomeroy says Congress addressed this issue in response to several events.