Insurers pan Obama's proposed tax on investment income

The American Council of Life Insurers today blasted a newly floated tax proposal on unearned income — part of a series of suggested changes to the Patient Protection and Affordable Care Act of 2009. President Barack Obama on Thursday will present a series of changes to his health insurance reform package, including a 2.9% tax on income from interest, dividends, royalties, rents — and annuities. Single taxpayers with more than $200,000 in income and married couples making more than $250,000 and who file jointly would be affected. The money from the taxes on unearned income would go toward the Supplemental Medical Insurance Fund, while additional revenue from taxes on earned income would help fund the Medicare Hospital Insurance Trust Fund. Not surprisingly, the life insurance industry opposes the proposed changes, which were unveiled Monday. Industry groups claim that Americans already have problems securing their retirement income and that the tax would dissuade many from buying annuities. “Policymakers should consider tax policy that encourages additional retirement savings and that encourages individuals to take their savings in an income stream that cannot be outlived,” ACLI president and CEO Frank Keating wrote in a letter to Treasury Secretary Timothy Geithner. “The administration's proposal to tax annuity income would counter both of these goals and negatively impact an important tool used to accumulate retirement savings and to secure lifetime retirement income,” Mr. Keating added.