GovWatch

House Debuts FY 2012 Budget Resolution; 1099 Reporting Repeal Sent to President's Desk

Issue:  Federal Taxes 

Date: April 6, 2011

Actions Taken: House Budget Committee Chairman Paul Ryan has introduced his proposed Fiscal Year 2012 Budget Resolution. The budget would cut approximately $6 trillion in government spending over the next 10 years. The information released yesterday is short on details, but Ryan's broad proposal for tax reform is to lower the top tax rate to 25% for both individuals and businesses, broaden the tax base by eliminating some tax exemptions, deductions and credits, and improve incentives for growth, savings, and investment.

The FY 2012 Budget Resolution also calls for the full repeal of Patient Protection and Affordable Care Act (PPACA). In the long-term, Chairman Ryan proposes to reform Medicare beginning in 2022 by creating a "tightly regulated exchange" for a variety of guaranteed-issue options for seniors to purchase health insurance coverage subsidized by "premium-support" payments.

Also yesterday, the Senate voted 87 to 12 to pass H.R. 4, repealing the expanded Form 1099 reporting requirements that were enacted in 2010. This is the same bill that the House passed on March 3, so it now goes to the President's desk for enactment. Though President Obama has said he does not like the revenue offset provisions of this bill, it is unlikely he will veto it, especially because there are likely enough votes in both the House and Senate to override a veto.

Next Steps: If your Senators were among the large majority who voted for H.R. 4, this is an opportunity to thank them for their votes to repeal burdensome and costly paperwork requirements on small businesses.

The FY 2012 Budget Resolution calls for eliminating some large tax expenditures, and most of the large tax expenditures impact our industry. These include the exclusion of life insurance inside build-up, exclusion of retirement savings, and exclusion of employer-provided health insurance, cafeteria plans, and group life, disability, and long-term care insurance. Some or all of these tax advantages could be eliminated or reduced under the new budget proposal.

However, Chairman Ryan's report explains that "the exact definition of a 'tax expenditure' is subject to debate." It also says that "tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation."

It is vital that your Congressmen are educated about the importance of the tax-preferred status of insurance and other retirement savings vehicles in encouraging more savings and more investment. As budget and tax reform discussions move forward, we must make sure that Congress understands that these tax advantages improve incentives for growth, savings, and investment, and they are the opposite of a "tax expenditure" that distorts economic activity and causes a drag on growth.

Please see the following "leave behinds" for more ideas on how to communicate with your Congressmen about the importance of the tax treatment of insurance and retirement savings vehicles:

• Insurance Tax Incentives Issue Brief
• Life Insurance: Providing Financial Protection
• Annuities: Creating Guaranteed Income for Life

---

NAIFA Staff Contact: Diane Boyle, Vice President - Federal Government Relations or Lillian Vogl, Director of Federal Relations.

Please visit us at www.naifa.org/advocacy

National Association of Insurance and Financial Advisors, 2901 Telestar Court, Falls Church, VA 22042

To unsubscribe from NAIFA Communications, please contact NAIFA Member Support at membersupport@naifa.org or call 877-TO-NAIFA.

Copyright © 2011 National Association of Insurance and Financial Advisors (NAIFA). All rights reserved.

Subscribe to NAIFA GovWatch

• 
• 
• Find out more about rss readers.