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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


Insurance Company Reserves


Dividends/Long-Term Capital Gains


Capital Gains at Death


Cafeteria Plans


Employer Provided Health/LTC Insurance


Self Employed Health/LTC Insurance


Health Savings Accounts 


Pension Contributions and Earnings—Employers 




Keogh Plans


Employer Provided Life Insurance


Employer Provided Accident/Disability Insurance


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

Michael Kerley
Senior Vice President
Federal Relations

Roland Panneton, FLMI
Senior Counsel
Law & State Relations

Gary A. Sanders
Senior Counsel
Law & State Relations



Jill Edwards
Director, Federal Relations

Michael E. Gerber
Vice President &
General Counsel

Magenta Ishak
Political Director
Law & Government Relations

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