Tax Reform Panel's Proposals May Discourage Life Insurance Purchases, Lawmaker Says

I am writing to express my concerns about proposals to impose taxes on the "inside cash value build-up" in life insurance. I am concerned that these taxes could discourage people from securing life insurance.

As you know, the President's Advisory Panel on Federal Tax Reform presented its tax reform options on November 1, 2005. While raising significant issues that need serious debate, the Panel's proposals for new savings vehicles would set arbitrary limits on the ability of Americans to protect their families through life insurance and annuities. The Panel's proposed accounts are intended to increase savings, and I certainly believe they should be examined. Unfortunately, the proposals also ignore some crucial components of sound financial planning. Families need to protect against the financial loss at death at any age through life insurance, and must guard against outliving retirement savings through the guarantees that annuities can provide.

I am concerned that the proposals would exacerbate the complexity of our current tax system rather than simplify it. For example, if it became necessary for taxpayers to determine the taxability of life insurance policies based on when the policies were issued, whether they were cash accessible, or included in accounts that never previously existed, it is possible new procedural and reporting problems would be created. Those problems must be avoided.

I look forward to working with you as Congress considers fundamental reforms of our nation's tax code. I am sure you would agree that simpler and more transparent tax laws have the potential to further transform our economy, spur job growth, and enhance wealth creation for all Americans.

Thank you for your consideration. Should you have any questions, or if I may ever be of any assistance to you, please do not hesitate to call.