Is regime change in Washington a threat to our business?Blog added by Jeff Reed on September 21, 2012
Jeff Reed

Jeff Reed

San Diego, CA

Joined: May 07, 2012

Definitely maybe. Any time a discussion of balancing budgets and deficit reduction breaks out, there is commentary around the possibility of changes to the tax treatment of insurance products. This election year is no exception, and we all need to stay informed about the various budget proposals and how they will impact our clients and our business.

The challenge, however, is separating fact from fiction. At any given time, we can find an "expert" who will tell us what we want to hear. In this case, the spectrum covers everything from "insurance products are a sacred cow" to "the sky is falling" and inside build up is going to be taxed in the very near future.

I am not sure that there is a way to cut through all the noise to the truth at this point, particularly given that the election is far from decided.

A recent article in the Wall Street Journal provides an excellent example of the issue. The article includes a discussion of some of the provisions of Mitt Romney's tax plan, a rebuttal from President Obama, and a reminder that Mitt Romney and his advisors have not previously indicated that taxation of insurance products and muni bonds are off the table. In fact, the article points out that taxing these assets would go a long way to funding the across-the-board 20 percent income tax cut Mr. Romney has proposed.

Confused yet? Wondering whose numbers to believe? You, and the rest of the nation, I think.

Rather than jump in to a political debate, what about the impact of this on our business? The assumption has always been that the tax treatment of inside build-up in life insurance and annuities is a critical component of their appeal, and that any change would negatively impact sales. While I am not going to stand here and say there will not be any impact, I am not sure that it would be quite as significant as some would have us believe. The feature set of current annuity products is strong enough to stand on its own merits and life insurance is still sold for the death benefit in most scenarios. That, however, is a discussion for another time.

If this debate accomplishes anything, it drives home the fact that we need to stay informed and involved in our industry and the political process. Regardless of your stance on any of the above, it is the only way our voices can be heard.
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