Should We Keep Corporate Welfare for Big Insurance?

As the President of the American Family Business Foundation, I hear the stories of family businesses and their employees everyday. Stories of family businesses that have survived for generations only to be lost to estate taxes are heart wrenching. Contrary to what is commonly known about the estate tax, the biggest losers in the estate tax schema are the 57% of American workers employed in those family businesses.

Family business owners who are compelled to pay additional, second-to-die life insurance premiums in order to pay the estate tax cannot put those funds back into expanding their businesses and hiring new employees. That, in turn, is a drain on federal revenues that could be generated from additional income tax in order to provide meaningful government services.

The estate tax isn't a progressive or conservative issue: It's an economic one. Family businesses -- the backbone of economic growth in America -- don't deserve to have Congress colluding with life insurance companies to keep alive an archaic tax that only results in the elimination of jobs and decreased federal revenues. Lawmakers have a responsibility to encourage small businesses, not weaken or diminish destroy them.

Big Insurance's interest in the estate tax goes far beyond their agents' interest in representing their clients. Large life insurance companies see the estate tax as their primary sales point with aging family business owners. This year, alone, the top eight life insurance companies spent more than $18 million lobbying to secure favorable estate tax legislation. Insurance companies have done this purely to pad their own pocketbooks. And they have padded them well. The life insurance industry brought in over $12 billion on second-to-die policies in 2005. Rest assured, that Warren Buffett, whose company owns several insurance companies did not testify in favor of the estate tax out of the goodness of his heart.

A recent study by Douglas Holtz-Eakin, the former head of the Congressional Budget Office, found that eliminating the estate tax could get President Obama half way to his goal of saving or creating 3 million jobs. According to that study, eliminating the estate tax would create the conditions necessary to produce 1.5 million new U.S. jobs.

While many proponents of the estate tax argue that it is the most progressive tax in the tax code, the fact is that it produces less than 1 percent of annual federal tax revenue. By comparison, the income tax generates more than 50 times that amount. In an economy that has reached 10.2% unemployment can we really afford not to ask: Is it worth maintaining what amounts to little more than corporate welfare for Big Insurance at the cost of family business created jobs?

For more information visit www.estatetaxtruth.org and watch the video.

 

Comments

[GettingAlong]

I'm not the smartest person in the world but just how does getting rid of a bad tax create 1.5 million jobs? Also what happens in the future to the revenue that was taxed in 2005 from commissions on those second-to-die sales that now won't be?

Let's be fair and do a good accounting of the situation. Be aware though, I don't want the estate tax to hit me.

[montemalone]

I think estate taxes sort out the greedy from the rest.
If you're so concerned about the family business continuing, give it to the kids before you die.
It's these old people that want to keep control until they draw their last breath, lording over the family.
I've never understood this philosophy of hoarding money saying it's for the kids once you die.
Why not put it to use now? It's about control.

[PolitiComm]

Most people do give it to their kids long before they die, but they have to pay what are called gift taxes too. Gifting is a strategy, along with "second-to-die" insurance, that financial planners will recommend. Gift taxes are no less of a shake down than the estate tax. It all boils down to this: If you pay me now, you can avoid the big hit later. Here's the problem: "Paying now" doesn't make it any easier to hire new employees (or keep old ones in their jobs) than planning to "take the big hit."

[Dick Patten - Huffpost Blogger]

I agree with PolitiComm. As far as I can see, all the "ways to avoid the tax" end up benefiting the insurance companies in one way or another. Also, $12 Billion is a lot of money. Didn't we already bail out insurance companies like AIG once this year?

[PolitiComm]

Okay folks, let's try a better analogy. You remember the good ol' days when Mobsters used to be able to stroll down the street, walk into a neighborhood business, break a few things (maybe some legs) and then collect "protection" money from the store owner?

Does that at all resemble what is going on here, maybe?

Insurance companies lobby the government to levy an estate tax and then go out and collect "protection" money from small businesses.

Now here's a moral question: Right or wrong?

[FoonTheElder]

The insurance companies aren't responsible for sustaining the estate tax. The estate tax has been around in some states since the 19th century.

If you have a problem with the insurance companies, complain to your legislators or state insurance board.

[FoonTheElder]

There are very few examples of family businesses lost to the Estate Tax. It is another Republican propaganda fairy tale. They bring this up every year, but never can find anyone whose business has been lost due to the Estate Tax.

In order to even owe Estate Tax, you need to be at least a millionaire, and usually a multi-millionaire. The Estate Tax is fairly easy to plan for, any millionaire businessperson who doesn't plan for it, has got to be pretty clueless when it comes to financial management.

There are huge loopholes to get around some the Estate Tax. Many of the wealthiest Americans in history paid 15-20% of their total estate in Estate Tax.

[PolitiComm]

Did you actually read Dick Patten's article? The point here isn't who pays the tax or doesn't. The point is that it is currently U.S. Tax Policy to allow insurance companies to use the threat of the estate tax to basically extort small business owners for annual "second-to-die" life insurance premiums. It is, in essence, a private tax benefitting insurance companies to the tune (according to Patten) of around $12 billion a year.

If you want an example of this, check out: www.youtube.com/ettruth

[FoonTheElder]

You don't have to have insurance to pay for Estate Tax, you need money.

If you've got a problem with the crooked insurance companies, talk to the state insurance bureaus where they are regulated. This is just a deflection of the issue, to repeal the estate tax because life insurance companies are crooks. His real goal is not to fix the insurance problem, but to get rid of the estate tax.

[dan-o]

The purpose of the estate tax is to prevent European style family dynasties from forming here and dominating American society. The sad thing is that is exactly what has happened. It is not about socialism, it is about the prevention of the accumulation of a significant portion of the nation's wealth from accumulating with a few wealthy families.

At the founding of our country many documents of the founders were sealed until they died because thay knew they would be accused of being class traitors by their fellow members of the wealthy class. They knew they were going against the interests of their own class but they also knew the detrimental effects of extreme wealth accumulation by a small class of citizens. Multigenerational wealthy people become similiar to European aristocracy who think of themselves as citizens of the world and lose touch with the nation that set the stage for their wealth creation and wealth retention.

I am all for no estate tax on the first $10 million of assets(adjusted for inflation) which should cover the majority of small businesses and farms but will prevent the multigenerational massing of extreme wealth.

[PolitiComm]

Look, Dan-O. Whether it is $1 million or $10 million, the point is that profiting off of people's death's and lobbying the U.S. government (which represents the people, not insurance companies) for the right to profit from their deaths is just wrong. I wouldn't advocate for the privatization of prisons and the right to carry out private executions of prisoners. Why would I advocate for what basically amounts to a private tax that benefits insurance companies? Whether the purpose of the tax is to keep dynasties from forming or not doesn't really matter. You, yourself, point out that they've formed anyway. I'm all for straight forward, progressive tax reform. The problem, I see is that true progressives aren't putting forward an understandable option. Conservatives have an understandable tax policy option: It's called a flat tax. Is that something we really want to see?

[adoantarel]

The estate tax wasn't established to help insurance companies. If that is an unfortunate side effect, maybe something needs to be done, but I doubt it. You don't need insurance to deal with the estate tax, you just need to plan ahead in some fashion.

If I sell you my company, taxes have to be paid on the transaction. if I die and you inherit it, you are still obtaining a very valuable object, the business. Shouldn't you have to pay taxes for getting this valuable thing? The idea that you have a right to something that your parent built b/c you are a product of their gamete is ridiculous. That is how we got royal families and the many inbred, egomaniacal monarchs of history.

America was supposed to be better than that. Everyone should have to work, to contribute, they shouldn't be handed a mercedes and a penthouse and a business b/c daddy did well.

[legalgirl]

Assets should placed in a trust to avoid paying the estate tax. If you have too much money for one trust, then have two or three. Put in the house, the cars, the life insurance, the jewelry, etc., etc. At death, beneficiaries will pay no estate tax. Very reasonably priced lawyers do this for their clients all the time. Estate tax is paid only by those with WAY, WAY, WAY more money than what I just described, unless they saw a lawyer, too.

[jmpurser]

Yes, more welfare for the wealthy. THAT'S what we need!

[PolitiComm]

To answer the question: It is time to end corporate welfare in all its forms. I've had enough of bailing out large, gluttonous corporations who give nothing back. I don't care if it does produce revenue for the government. Allowing a single industry to control tax policy in this country to the extent the insurance industry has, is just wrong.