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Life insurers keep eye on tax panel and its recommendations.

A federal commission examining fundamental changes to the U.S. tax code is very unlikely to scrap the income tax system in favor of a national sales tax or a European-style value-added tax, the panel's vice chairman told the American Council of Life Insurers. But a trio of former U.S. Treasury Department tax officials noted that whatever changes the panel ultimately recommends could have tremendous consequences lot the life insurance industry.

Addressing the general session of the ACLI's annual convention, former Louisiana Sen. John Breaux--who has served as vice chairman of the President's Advisory Panel on Federal Tax Reform since its inception in January--said the panel still is examining a number of proposals to craft a "fairer, simpler" tax code, but shifting to a sales or value-added tax wasn't likely to be among the recommendations.

However, he noted the panel is in agreement on the need to scrap the Alternative Minimum Tax, and its charge to provide revenue neutrality creates a need for offsets. Several potentially contentious options remain on the table, including capping or repealing tax breaks for employer-provided health insurance, both as a deduction for the employer and as exempt income for the employee. Other options the panel is mulling include significantly reducing the $1 million cap on mortgage interest deductions and eliminating federal deductions for state and local taxes, Breaux said.

Originally expected around the end of July, the panel's report has been delayed, in part, by the failure of talks on Social Security reform and the fallout from hurricanes Katrina and Rita. Because of the scheduling, Treasury won't have time to include the findings in the department's budget, and the department probably won't release its own report until around the time of President Bush's next State of the Union address.
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Title Annotation:Briefing
Comment:Life insurers keep eye on tax panel and its recommendations.(Briefing)
Author:Lehmann, R.J.
Publication:Best's Review
Article Type:Brief Article
Geographic Code:1USA
Date:Nov 1, 2005
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