The authors then go on to imply that the industry's greed has resulted in "scrutiny from Congress over the years" (apparently that august body was one of the few perspicacious enough to notice the aforementioned shift.) Indeed, the tone and language appear crafted to give the impression of a looming legislative backlash through which the "life-insurance tax preferences" would be stripped from the industry.
Overall, the piece reads like a populist outcry over yet another example of main-street Americans losing out. The reader could be forgiven for their sense of outrage over how the rules for life insurance seem designed to help the rich get richer with unnecessary and unfair tax advantages.
The appearance of the article in the pages of the Wall Street Journal provides sufficient cause to doubt the "populist manifesto" reading. Perhaps, one might wonder, the fact that the rich are an increasingly disproportionate share of those buying permanent life could also be explained by a declining number of middle-income Americans able to pay more than term premiums. But if that were true, what could possibly motivate the WSJ to frame it in such populist terms?
For clues, let's review the authors' choice of language in a key part of the article. As we do, ask yourself this, "Who stands to gain if the assets now sheltered cash value life insurance policies lose the advantage of tax-deferral?"
Of the two main life-insurance tax preferences, the one that has faced the most scrutiny from Congress over the years is the provision that lets investment gains accumulate tax free within permanent-life policies.
The Congressional Budget Office last year estimated that eliminating the tax preferences for investment gains inside permanent-life insurance and annuities would raise an additional $265 billion in taxes over a decade.
Some tax-policy specialists contend the provision artificially favors income in insurance policies over things like interest on bank certificates of deposit. Some also say that because the break enables people who can afford large life policies to accumulate earnings free of taxes, it gives the affluent tax advantages far beyond those available to middle-income people through a 401(k) or IRA.
Hmmm ... if the cash "trapped" inside cash-value life insurance policies were to leave those policies, it would end up where? Available to be managed by whom?
I'm just sayin ...
