NAIFA Frontline

NAIFA

AALU

AHIA

Advisor Today

Click here for print version

October 15, 2007

Volume 5, No. 16

A Chilling Read: The Tax Expenditures List

Every Sunday, the Washington Post publishes a book review section covering the latest novels and works of nonfiction. The Post has yet to feature a recently published tome authored by the staff of the Joint Committee on Taxation entitled Estimates of Federal Tax Expenditures for Fiscal Years 2007-2011. But if it had, the book would have been listed under the heading "Scary Reading."

The Joint Tax Committee publication is scary because it clearly lays out exactly where the money is that is not currently taxed—but could be if Congress and the President decided to change course. That's what a tax expenditure is—a revenue loss to the government because of some special provision in the tax law granted by Congress.

Here's a list of major tax expenditures that relate to the business activities of NAIFA members and the revenue loss associated with each over the period 2007-2011:

Revenue Function
 

Revenue Lost 2007-2011
(In Billions)

Cash Value of Life Insurance/Annuities

$150.9

Insurance Company Reserves

$10.7

Dividends/Long-Term Capital Gains

$631.9

Capital Gains at Death

$279.9

Cafeteria Plans

$185.5

Employer Provided Health/LTC Insurance

$628.5

Self Employed Health/LTC Insurance

$24.3

Health Savings Accounts 

$4.6

Pension Contributions and Earnings—Employers 

$607.3

IRAs

$94.1

Keogh Plans

$54.5

Employer Provided Life Insurance

$13.3

Employer Provided Accident/Disability Insurance

$15.3

The take away from this Joint Tax work of nonfiction is that the products and services that NAIFA members use in their daily work with clients receive a lot of special treatment. As the late Sen. Everett Dirksen (R-IL) observed back in the 1960s: "A billion here, a billion there, after a while you got some real money." And it's all neatly laid out on the printed page.

How is the book used? Say you're the federal government and you are running a budget deficit, but you want to stop running a deficit. You can cut spending or increase taxes—or some combination of the two. Or, say, you want to increase the funding for a program favored by the majority in Congress but don't want to increase the deficit. Again, you have the same choices.

Making choices is never easy in Congress, but depending on the political environment, raising taxes on a particular group is usually easier than cutting overall federal spending. That's the robbing Peter to pay Paul principal. Just ask the tobacco industry. The bulk of the funds ($35 billion over five years) needed to pay for the congressional plan to beef up the State Children's Health Insurance Plan (S-CHIP) would come from an increase in tobacco taxes. Say what you will about tobacco, but the point is clear. If Congress wants to do something, and it needs money to do it, it knows just where to find it. It's all in the book.

Back to October 15, 2007, NAIFA Frontline


NAIFA's Law and Government Relations Department

William R. Anderson
Senior Vice President
Law & Government Relations
703-770-8193
wanderson@naifa.org

Michael Kerley
Senior Vice President
Federal Relations
703-770-8155
mkerley@naifa.org

Roland Panneton, FLMI
Senior Counsel
Law & State Relations
703-770-8187
rpanneton@naifa.org

Gary A. Sanders
Senior Counsel
Law & State Relations
703-770-8192
gsanders@naifa.org

 

 

Jill Edwards
Director, Federal Relations
703-770-8158
jilledwards@naifa.org

Michael E. Gerber
Vice President &
General Counsel
703-770-8190
mgerber@naifa.org

Magenta Ishak
Political Director
Law & Government Relations
703-770-8152
mishak@naifa.org

National Association of Insurance and Financial Advisors, 2901 Telestar Court, Falls Church, VA 22042