AALU Tax Reform Update
The AALU recently released an update on the much-anticipated tax reform and how it impacts life insurance planning. President Trump wanted to have the tax reform completed by August, however, it has now been pushed back to the end of 2017. Health care reform continues to loom large as a hindrance to tax reform discussions. The Republican leadership and the Trump Administration must work together to produce a plan that cuts through the bureaucratic process.
Under the new tax reform plan, there would be significant reductions in taxes for businesses and individuals. The reductions, by some estimates, would lead to a loss of up to $6.2 trillion in revenue over the next 10 years for the federal government. There are arguments on both sides of the aisle as to what impact this will have on the government. The Republicans have two options: 1) Find a way to replace the revenue loss from the tax cuts or 2) Deficit financing. Both options have limitations. According to the AALU, “reforms must be revenue neutral in the years following the budget window specified in the reconciliation instructions-typically ten years.” In other words, the reconciliation provides a specific length of time that the tax reform can run up the deficit.
Executive Benefits Network will continue to send out updates and articles to keep you informed as the tax reform process moves along. While the date has now been moved back to the end of 2017, businesses and individuals are being advised to continue life insurance planning and to make their decisions based on the existing tax code, with adjustments being made to their plan in future years.
To read the full article by the AALU, please click here.