This is a year for life insurance industry representatives to try to preserve the existing tax treatment of life insurance rather than to promote new tax incentives, a speaker told Association for Advanced Life Underwriting (AALU) members today.
Bill Richardson, a former Democratic New Mexico governor and former Clinton administration ambassador to the United Nations, spoke here during the opening general session at the AALU’s 2011 annual meeting, which started Sunday and is set to run until Wednesday.
Members of AALU, Reston, Va., are preparing to meet with their congressional representatives Tuesday afternoon, during House and Senate town hall meetings.
Richardson encouraged AALU members to take a defensive approach this year because of lawmakers’ heightened focus on reducing the federal budget deficit and the national debt. Federal tax benefits for life insurance policyholders, such as the tax-deferred growth of cash values in permanent policies, could be a target for legislators seeking new sources of revenue, he warned.
Richardson said the next congressional battle — over budget cuts and efforts to raise the nation’s debt ceiling – could affect the nation’s ability to tap the capital markets.
“Debt ceiling discussion in the next three weeks will [impact] American’s international standing and our economic recovery,” Richardson said. “Our ability to govern will be tested. My hope is that you will tell [both Democrats and Republicans] not to dig in, and to avoid politicizing the issue.”
The recommendations of the bipartisan Commission on Fiscal Responsibility and Reform, chaired by Alan Simpson, a former Republican senator from Wyoming, and Erskine Bowles, the former chief of staff to President Clinton, could provide political cover on the deficit and debt issues as Congress seeks a political consensus, Richardson said. He said he supports passing a constitutional amendment to provide for a balanced budget over a 15-year period.
“Almost every state has to balance its budget,” Richardson said. “Why can’t the federal government?”
Richardson added that a constitutional amendment may be necessary in part because of a lack of civility in political discourse. Republican and Democrats “don’t talk to each other,” he said, observing they pay more attention to their constituents, bloggers and political pundits on cable TV.