Tax Storms Ahead

An early warning: The stars are aligning for major changes in the makeup of the U.S. government and its tax policy over the next several years. And for an industry like insurance, whose products are so tied to tax policy, a vigilant leadership and rank-and-file will be essential not only for future prosperity, but also its very survival.

Events in the last week justify this concern. Travis Childers, a conservative Democrat, defeated a Republican 54% to 46% in the campaign to represent Mississippi’s 1st congressional district.

The Washington Post called the victory a potential “bellwether” of upcoming change. It constituted the third straight special election defeat for the Republicans this year.

As Joe Lieber, a former top aide to a conservative Republican senator from Oklahoma and now a pundit at Washington Analysis, a buy-side securities firm, said even before the vote: “That Republicans have to even defend this seat shows just how weak the GOP ‘brand’ is.”

Lieber predicts that Democrats will gain “a number of seats in the teens” in the House to build on their 31-seat pickup in 2006. And, he says “they are likely to match, if not surpass, their 6-seat pickup in the Senate.”

And those changes will come at a crucial time for tax policy. In recent comments at the annual meeting of the Association for Advanced Life Underwriting, Ken Kies, an AALU tax counsel, warned that he sees the 2009-2010 congressional cycle “as the most active tax legislative exercise that the country has ever witnessed.”

Kies sees the coming Congress as potentially the “mother of all tax writing periods in our history,” calculating that $4 trillion of tax provisions will be expiring by the end of 2010. “That is more expiring tax provisions than ever before,” he said. “Any industry is well advised to view everything as on the table, because it will be.”