Legislation approved by Congress over the last several days to avoid the fiscal cliff is not a grand solution.
Indeed, in floor comments Tuesday night urging support for the fiscal cliff package crafted by the Senate over the last few days, Rep. David Camp, R-Mich., chairman of the House Ways and Means Committee, made it clear that there are many battles yet to be fought.
“As big as [the fiscal cliff package] is, it is only the first step when it comes to taxes,” Camp said.
“This legislation settles the level of revenue Washington should bring in,” Camp said.
“Next, we need to make the tax code simpler and fairer for families and small businesses. And, we need to pursue comprehensive and fundamental tax reform to make American businesses and workers more competitive in the global marketplace,” Camp added.
That is because while the estate tax provisions are a big win, it is not the over-arching package that would provide certainty for the tax consequences consumers would face in buying the rest of the insurance industry’s products.
In fact, the life insurance industry has been preparing for months to defend the tax-advantaged status of a host of products not affected by the estate tax.
The vehicles Camp will have to pressure for changes in tax policy are the current debt ceiling, which must be raised by mid-March at the latest, and how to pay for cuts in entitlements and defense spending that were also kicked down the road for several months.
That leaves in play comprehensive tax reform as a means of raising revenues enough to end the government’s reliance on debt to finance current policies.
A bipartisan group is working on comprehensive tax reform in the Senate, led by Camp, who has held joint hearings with the Senate Finance Committee on the issue.
Industry tax policies on the table include inside buildup, Corporate-Owned-Life-Insurance and Bank-Owned-Life-Insurance, non-qualified deferred compensation plans and the dividend-received deductions on variable annuity contracts.
Retirement tax policies could also be on the table. Every year, the government spends more than $100 billion on tax breaks to encourage Americans to save more for retirement. But a study published in November based on Denmark data suggests such provisions may have little effect on the amount Americans save.
Industry trade groups are aware that retirement savings could be on the table, and have prepared data designed to support current policy. They have already enlisted support in Congress for their views.