WASHINGTON BUREAU — The men and women who follow federal insurance legislation closely are wondering how much Congress will be able to do in the next few years.
The voters put Republicans in firm control over the House and left Democrats with a slim majority in the Senate.
Republicans are in a much better position than they were Monday to block bills they oppose, but they can make a bill law only if they can attract the support of about 10 Democrats and get President Obama’s signature, or if they can muster the two-thirds Senate majority needed to overturn a veto.
The change in the House is coming as the Obama administration is starting efforts to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act, a massive act that, among many other things, will create a Federal Insurance Office (FIO).
Congress also is looking into what to do about Bush-era tax breaks created in 2001 that are set to expire Dec. 31.
Marc Cadin, a senior vice president at the Association for Advanced Life Underwriting, Reston, Va., says he is optimistic that the insurance industry will thrive despite the sour economy and likely deadlock in Congress.
“Regardless of which party is in power, challenges from Washington remain, but the drive and entrepreneurial spirit of the life insurance agent will ensure the ongoing success of this industry,” Cadin says.
Michael Kerley, a senior vice president at the National Association of Insurance and Financial Advisors, Falls Church, Va., says the big financial services issue Congress will be dealing with in the upcoming lame-duck session is the tax rate for top-earning taxpayers.
In 2001, Kerley says, Congress reduced the capital gains tax rate on dividends to 15%, from 20%, but left the tax imposed on variable annuity and variable life dividends at the top rate.
“That rate really impacts insurance industry rates,” Kerley says. “It is unlikely that will be changed We argued for a compromise in 2001 to no avail. If nothing happens, what would happen to our products?”
A lobbyist who requested anonymity says he believes Congress will extend the Bush-era tax breaks for “2 years, at most,” and also could come up with a compromise on the estate tax.
The compromise estate tax exemption could be in the
$3.5 million to $4 million range, with a 35% to 45% tax rate for the next several years, the lobbyist says.
“I don’t think either party wants to see taxes go up with a soft economy,” the lobbyist says. “Republicans don’t want raise taxes, and the Republicans won.”
Retirements and the results of the general elections could make Sen. Tim Johnson, D-S.D., the new chairman of the Senate Banking, Housing and Urban Affairs Committee, and Rep. Spencer Bachus, R-Ala., the new chairman of the House Financial Services Committee.
About one-third of the states could have new insurance commissioners by mid-year.
All of the financial services industry regulatory turnover could increase the influence of the FIO, according to Howard Mills, a former New York state insurance superintendent and chief advisor at the insurance industry group at Deloitte, New York.
The FIO may get a chance to seize the initiative and fill the void left by the loss of commissioner experience, Mills says.