Inside Buildup

  • These two meetings, plus the announced intention of some members of Congress and the Treasury Department to consider taxing the inside buildup of cash values, adds a note of uncertainty to our discussion today. 

--  PAUL J. OVERBERG

1983 - INDIVIDUAL LIFE INSURANCE, Society of Actuaries

  • President Reagan's tax proposal [11], released in May, 1985

  • If life insurance policies lose the tax deferment advantage so all interest earned on the cash value is taxed currently, universal/variable life insurance policies would become unmarketable.

1985 - Universal / Variable Life Insurance: Policy Purchase Decisions, Stephen P. D’Arcy and Keun Chang Lee

JULY 19, 1985
Impact of Tax Reform on Insurance Industry
Witnesses testified on the effects that President Ronald Reagan’s proposed tax reform will have on the Life insurance industry.
https://www.c-span.org/video/?125556-1/impact-tax-reform-insurance-industry

1985 - GOV - Comprehensive Tax ReformHearings Before the Committee on Ways and Means, House of Representatives - Part 7

https://www.c-span.org/video/?125556-1/impact-tax-reform-insurance-industry

According to an August, 1977, Wall Street Journal article, the Treasury Department is considering, as a part of President Carter's comprehensive tax reform legislation, taxation of the "inside buildup" in cash-value life insurance policies.

  • Under this proposal the annual interest element on the "savings" portion of such policies would be taxed as income to policyholders.
  • The ACLI submitted a memorandum opposing the proposal strenuously to Treasury Secretary Blumenthal and White House officials.
  • Needless to say, implementation of any such proposal
    would have profound repercussions on the life insurance industry.

1977 - Report of the Historian, Society of Actuaries - 22p

Congressman Heftel <Hawaii>

  • .....unfortunately, I think that we are misunderstanding what will happen from taxing the build-up because I think the product will disappear, and so I don't understand where Treasury comes up with revenue figures based on the fact that people will continue to buy the product and that sales people will continue to sell the product.
  • It is my assumption that the product simply won't be sold. Sales people I have talked with indicate that they just simply will sell something else, but they won't be selling whole life.

Mr. BECK <Prudential>: That is right. (p6069)

1985 - GOV - Comprehensive Tax ReformHearings Before the Committee on Ways and Means, House of Representatives - Part 7

https://www.c-span.org/video/?125556-1/impact-tax-reform-insurance-industry

The Chairman: Bill, I have a question. You want to encourage savings.

Senator ROTH. Right.

The CHAIRMAN. You have a provision in here to tax the inside

buildup on life insurance, which to me seems contra to the encour-

agement of savings. I am curious why you put in the Susas, which

indeed will encourage it but tax the inside buildup.

Senator ROTH. Mr. Chairman, that is not part of my proposal.

The CHAIRMAN. Oh, isn't it?

Senator ROTH. I understand that Treasury is going to do so, but

it is not included as part of ours.

The CHAIRMAN. Then my information is wrong. I thought you

were taxing it. I apologize.  (p24)

 

1985 0509 - GOV - 1985 Tax Reform - [PDF-210p]