Reports from the New Jersey agents about Hurricane Sandy re-raise the question a lot of people asked in Sandy’s aftermath: Is this the new normal? Similarly, as media outlets and the internet count down to the fiscal cliff and the (perceived) inability of Congress and the White House to avert economic disaster, people ask: Is THIS the new normal?
More specifically, since most of the political rhetoric is about taxes, is this the new Tax normal? If so, it’s fair to ask what it means for families and businesses using permanent life insurance and annuities to undergird basic financial security. That’s because the new normal seems to be that tax revenue is going to go up, some-how, some-way. Unknown is the mechanisms Congress will choose to generate the revenue increases.
President Obama is strongly making the case that high income earners should be subject to higher tax rates, however you define “high earner.” GOP congressional tax leaders are suggesting a tax reform way, a way that focuses on limiting deductions, eliminating exemptions or reducing exclusions.
Agents know that families are encouraged to purchase life insurance and annuities to some degree because of the current tax treatment afforded their purchase. How Congress chooses to raise revenue in the tax reform option could have long term implications for the basic financial security of American families.
At the moment, it is not clear which way the fiscal cliff issue is going to go although a lot of insiders think a deal will be done before too long. If Congress and the White House do reach a deal this year it is quite likely much of the details will have to be worked out in the New Year—likely under the banner of “tax reform.”
Under almost any deal scenario, the new normal means that NAIFA members will have to continue to make the case that the tax treatment of permanent life insurance and annuities promotes a critical benefit to society--and should be continued. It will not be easy. But, what is crystal clear is that NAIFA members will be equal to the task.