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Obama Floats Trial Balloons

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Office of Management and Budget officials have salted the latest edition of Analytical Perspectives with many ideas for increasing tax revenue and cutting tax expenditures.

The ideas getting the most attention from insurers are described in a section of the Obama administration’s Analytical Perspectives budget documen that concerns efforts to create a Health Reform Reserve Fund.

The same document also lists a list of “loophole closers” that could affect some life insurers. Some would limit shifting of income through intangible property transfers; repeal the 80/20 rules, which determine whether a U.S. company does enough business overseas for its interest and dividend payments to be treated as foreign-source income; prevent use of equity swaps to avoid dividend withholding taxes; and fight under-reporting of income through use of accounts and entities in offshore jurisdictions.

Another provision that could affect some insurance company executives and financial services clients would phase out and limit itemized deductions of expenses, including medical expenses, for single taxpayers with annual taxable incomes over $200,000 and married filers with incomes over $250,000.

A third provision would require employers with 10 or more employees that do not offer retirement benefits to enroll employees in individual retirement accounts automatically starting in 2012. Employees could opt out, but employees who failed to opt out would have 3% of their compensation go into the IRA automatically.

Elsewhere in the Analytical Perspectives document:

Page 58 – The Obama administration casts doubt on the idea that group life insurers will have an easy time getting themselves included in the Terrorism Risk Insurance Program.

Like the Bush administration, the Obama administration says it wants to reduce federal subsidies for terrorism insurance, not expand involvement.

“Beginning in 2011, when the economy is expected to have stabilized, and then again in 2013, the proposal would increase the insurer deductible and co-payment, and the event trigger amount for federal payments,” officials write.

That proposal and related proposals could save $644 million over 10 years, officials estimate.

Page 70 – A discussion of the Troubled Asset Relief Program and related programs ends with a summary of the Obama administration’s views on systemic financial institution risk.

“The nation’s regulatory structure must assign clear authority, resources, and accountability for each of its key functions,” officials write. “Turf wars or concerns about the shape of organizational charts must not prevent the establishment of a substantive system of regulation that meets the needs of the American people.

Page 171 – In a discussion of the underpinnings of fiscal policy, Obama administration officials note that health reform is needed for long-term fiscal stability.

“The health reforms proposed in this budget are the key to achieving long-run fiscal stability,” officials write. “Without significant health reform it will be impossible to rein in federal spending as required for fiscal stabilization, since in the absence of reform the government’s major health programs – Medicare and Medicaid – are projected to be the most rapidly growing programs in the budget by a large margin. A successful health reform that slows the growth of per capita health care costs is also the essential ingredient for expanding health insurance coverage without permanently adding to the projected level of long-run spending “

The Analytical Perspectives report is available here.