Annuity Tax Added to the Health Reform Debate
House and Senate Democrats, along with White House officials, continue to meet to develop strategy and finalize a package of changes to the Senate-passed health reform bill – H.R. 3590. The Congressional Leadership hopes to finish work on reform by the Easter recess using the budget reconciliation process. There are many difficulties using reconciliation and it is unclear whether it will succeed. View the Health Count to see where House members currently stand regarding the next vote on health reform.
On March 11, the Congressional Budget Office issued its cost estimate for the health reform bill—H.R. 3590—as passed by the Senate on December 24, 2009. CBO Director Douglas W. Elmendorf says the estimate “differs slightly” from the estimate released Dec. 19. The direct (mandatory) spending and revenue effects of enacting H.R. 3590 as passed by the Senate would yield a net reduction in federal deficits of $118 billion over the 2010-2019 period.
Critics question the deadline of pushing through a yet to be determined reconciliation package without knowing the full cost and suggest, based on the length of time to score the Senate bill, it could be Columbus Day before the final costs are known.
NAIFA’s concerns with the initial bill remain and we are especially troubled by the President’s proposal to add a 2.9% assessment (equal to the combined employer and employee share of the existing medical hospital insurance - “HI” - tax) on income from interest, dividends, annuities, royalties and rents, other than such income which is derived in the ordinary course of a trade or business which is not a passive activity (e.g., income from active participation in S corporations) on taxpayers with respect to income above $200,000 for singles and $250,000 for married couples filing jointly. Some believe it likely that the ordinary income that is received and taxed on the surrender or sale of a life insurance contract could be determined by the IRS to be subject to that tax, imposing a new tax burden on life insurance (as well as annuity) products for taxpayers with incomes above the $200,000 and $250,000 thresholds. To read more about this, please see the article Proposed Health Insurance Surtax on Unearned Income – Impact on Life Insurance? in this issue of GovTalk.
NAIFA firmly believes the price for health reform should not come at the expense of responsible consumers who plan for their retirement needs.
While the details of the reconciliation package are not yet known, it is important to share you concerns with your clients and the media. In addition to information available on the NAIFA website, your clients might enjoy consumer oriented information available on our coalition website Get Health Reform Right and Rethink Reform.
Op-ed Drafts/Samples are available to assist you with media communication. Remember to use CapWiz to easily find your local media outlets by entering your zip code.
NAIFA Staff Contact: Diane Boyle, Vice President – Federal Government Relations, at (703) 770-8252.
