Life Insurance Companies Used to Love Republicans, Now Love the Estate Tax More
On January 1, the estate tax—now at zero—comes roaring back. Assuming congressional inaction, the tax kicks in at 55 percent for all estates over $1 million. In fact, it's unlikely that the tax will be back in full; this is one of the issues the lame ducks are supposed to be dealing with right now. But where and how new rates are fixed means there's a lot of cash at stake, which means there's a lot of cash being spent on the Hill.
Life insurance is a good way to work around a system of high estate taxes—payouts are untaxed, and likely to remain that way. This means the life insurance industry has a lot to gain in a world with high estate taxes. From a nice little paper [PDF] for the American Family Business Foundation by Tim Carney and Dick Patten:
The life-insurance lobby spent $10 million a month lobbying in the first half of 2010. During this same period, only three industries—pharmaceuticals, electric utilities, and oil and gas—spent more over the same period....
Life insurers paid more to lobby than even the securities and investment industry, and that period included the debate and passage of the financial regulation bill. Famously connected industries like tobacco, health insurers, and defense contractors all spent significantly less on lobbying than did the life insurance industry.
New York Life, Met Life, and Northwestern Mutual each spent about $500,000 per month on lobbying in the first half of 2010.
The industry also seems to believe that Republicans are serious about keeping estate taxes low or at zero, as evidenced by the trend in political donations:
Let's hope Republicans live up to the life insurance industry's low expectations.
Via Arnold Kling.
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Hat tip: Johnny Longtorso?? (from comments in today's morning links)
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I've never trusted Klings, and I never will.
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How can a family owned business or farm have life insurance?
Note: One thing you can do is write up deeds to your property to members of your family and simply keep them with your will.
Just have them recorded after you die. The recording of the deed does not set the date of transaction...it only records it. The actual transaction occurred when you signed it....this might be different in other states.
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Right, life insurance biases people in favor of liquid assets, and away from family businesses and farms.
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And thus, by inference, the estate tax biases people in favor of liquid assets. It certainly encourages the growth of finance.
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Simple, you buy enough life insurance to cover any taxes on the farm.
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It's actually good policy. The corporation buys a policy for the major stockholders (ie the two partners who own the small business) so that if one of them dies the other isn't left with the dead one's wife as a partner.
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"The life-insurance lobby spent $10 million a month lobbying in the first half of 2010. During this same period, only three industries—pharmaceuticals, electric utilities, and oil and gas—spent more over the same period"
You gotta problem with free speech, Katie M-W? Corporations are people too, you know. Or at least "artificial persons."
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The North American Variegated Dipshit is warbling again. Listen to his plaintive cry.
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You can dislike what someone says and defend their right to say it, at least if you believe Voltaire.
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"Life insurance is a good way to work around a system of high estate taxes—payouts are untaxed, and likely to remain that way."
Sure, until some enterprising young staffer with delusions of Congresshood whips up a little research paper.
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Sure, until some enterprising young staffer with delusions of Congresshood whips up a little research paper.
Do staffers ever make it to congress? or any elected position with any regularity?
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To take one example, Paul Ryan was a staffer to Senators.
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Kevin McCarthy as well.
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Indeed, when he defeated John Heckenlively and Joseph Kexel by a wide margin, which were both unerterprising, I guess.
Nevertheless, great article.
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Life insurance is a good way to work around a system of high estate taxes
Of course, life insurance generates deadweight costs to the firm (those premiums could have been put to productive use) and distorts the markets (as noted above).
But other than that, sure.
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The industry also seems to believe that Republicans are serious about keeping estate taxes low or at zero, as evidenced by the trend in political donations:
No, that trend line seems to indicate the industry wants to buy access to whichever party is in power, otherwise the donations to Democrats would be minimal.
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Well, I guess we'll find out for sure if you're right beginning next year.
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Why did contributions to Democrats go UP after 2002, instead of after 2000, then? The 2002 elections resulted in the GOP taking the Senate.
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Life insurers paid more to lobby than even the securities and investment industry, and that period included the debate and passage of the financial regulation bill.
New York Life, Met Life, and Northwestern Mutual each spent about $500,000 per month on lobbying in the first half of 2010.I don't know about the other two, but New York Life is very much a part of the securities and investment industry.
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Lobbying government is not the problem, abuse of this method of making a voice heard is what should be addressed!