In the late 1960s, Hollywood inflicted on the American public a low-budget science fiction film called Mars Needs Women. With a ludicrous plot and amateurish production values, it was widely panned by critics. Even Tommy Kirk, the film’s leading man, called it "undoubtedly one of the stupidest motion pictures ever made.”
This is not to say there are necessarily parallels to draw between the film and what is going on in Washington these days. In the nation’s capital, tax reform is serious business. And while the next few months may bring some proposals that seem to come from outer space, we can’t simply laugh them off like a corny sci-fi flick.
The future financial well-being of the American public is at stake. At least it is for those who hope to one day retire, receive adequate and affordable health insurance or provide for their families when they are no longer around to do so.
The products and services NAIFA members offer their clients emerged from the cliff negotiations largely unscathed, which simply means they are still on the table the next time around.
And the next time is likely to come sooner rather than later.
There’s never a good time for elected officials to take bad news to voters, but when faced with no choice the beginning of a new election cycle is the most palatable time.
Which means 2013 is shaping up to be a watershed year for tax reform.
Congress needs money. Unlike with the Martians in the movie, we can’t call up the U.S. Army and make them go home empty handed.
There are some $1.1 trillion worth of credits, deductions and exemptions in the tax code. Congress will be scrutinizing each one of them. According to a recent Associated Press article, they include:
- $181 billion in tax-free employer contributions to employees’ health insurance and expenses
- $165 billion in untaxed retirement plan contributions
- $23 billion in income from life insurance products
As insurance and financial advisors, NAIFA members know that there are very good reasons behind the tax treatment of insurance and retirement products. The tax-free death benefit and tax-deferred cash-value buildup of life insurance has been around since the permanent federal income tax came into existence 100 years ago.
Employee-sponsored health care and retirement plans are crucial to ensuring the long-term physical and financial health of Americans as they grow older. Life insurance allows people to provide for the financial security of their families, even if they are unable to do so themselves.
Without these products, and the incentives that encourage Americans to buy them, many more people would turn to government entitlement programs for help when they suffer financial setbacks, lack money for retirement or have health problems.
NAIFA and its members are hard at work, reinforcing the message with Congress that these products and their tax treatment are important. For many families and individuals, they mean the difference between prosperity and privation, success and failure, or even life and death.
Where Congress sees dollar signs, we are making sure they see people.
NAIFA members have a unique ability to tell lawmakers the story of a family able to provide for a sick child because of an employer-sponsored health plan. Or of a small company able to stay in business because its partners were protected by life insurance. Or of retirees able to keep their house and maintain their standard of living thanks to an annuity product.
Unlike a cheesy Hollywood production, these are real stories. They are stories Congress needs to hear.