GRAPEVINE, TEXAS — What if Democrats and Republicans in Congress show they can work together by uniting to tax life insurance policy inside buildup?
That question haunts people like Leon Huffman, an Orlando, Fla., life and annuity distributor and government affairs committee co-chair at the National Association of Independent Life Brokerage Agencies (NAILBA), Fairfax, Va., and Alex DelPizzo, an insurance lobbyist at Winning Strategies L.L.C., Washington.
The possible new threats to tax-free buildup of cash value inside life insurance policies came up today during a government affairs panel discussion at NAILBA’s annual meeting. Huffman and Del Pizzo appeared with a third government affairs expert, Chris Greis, a life wholesaler at Leaders Partners Inc., Barrington, Ill.
We’re “live tweeting” NAILBA 29 here, under the Twitter name NatUndLife.
Now that the Republicans have made massive gains in Congress in the recent elections, “you have a bunch of people there who have no idea what you do,” DelPizzo said.
Huffman noted that some key leadership posts are still in contention. Rep. Spencer Bachus, R-Ala., for example, has been the highest-ranking Republican on the House Financial Services Committee, but he received large contributions from federal mortgage guarantee agencies, and many Tea Party members would prefer to see the committee chairman be Rep. Ed Royce, R-Calif.,Huffman said.
Royce is a long-time friend of the insurance industry.
Once the Republicans settle in, they could help control how the Obama administration applies the provisions in the new Dodd-Frank Wall Street Reform and Consumer Protection Act, but Republicans and Democrats seem unlikely to work well enough together to get much passed, the panelists agreed.
Despite the deep divisions between the parties, Democratic senators from conservative states and Republican senators worried about challenges from Tea Party members could find ways to cooperate on efforts to raise federal revenue and cut the deficit, DelPizzo said.
Huffman said he believes the real message of the fall elections was fiscal. “The country is scared, truly frightened, by the mounting debt,” he said.
Past efforts to tax inside buildup have failed, but “the threat “could be real this time,” Huffman said.
For now, Democrats and Republicans in Congress are showing little capacity to team up to pass controversial tax bills. They are doing little about the estate tax and almost nothing to come up with a permanent estate tax solution, DelPizzo said.
In 2011, if Congress does nothing, the estate tax will revert to the high levels in effect back in 2001.
DelPizzo said he expects to see Congress to do nothing and 2001 estate tax rules to come back.
“I would hope cooler heads prevail, but it hasn’t happened yet,” DelPizzo said. “I wouldn’t count on it.”
Although gridlock now prevails in the Capitol, insurance lobbyists are worried because the National Commission on Fiscal Responsibility and Reform, a bipartisan group created by President Obama to recommend ideas for cutting the deficit, is considering a list of proposals that calls for eliminating all “tax expenditures,” including the home mortgage interest deduction and special consideration for retirement accounts and insurance products.
If defenders of the home mortgage interest deduction go head to head with defenders of protecting inside value buildup, “who’s going to win that battle?” Huffman asked.