Meanwhile, President Trump promised today to slash tax rates for businesses and individuals, setting the stage for yet another epic legislative contest. Details have only slowly dribbled out, but so far there is no indication that the Trump plan would explicitly move to tax employee benefits. Click here for the entirety of what the White House has issued on tax reform.
The top corporate rate would move from 35 percent to 15 percent, and the proposal would reduce and simply individual rates. Aside from the home mortgage interest deduction and exemption for charitable contributions, the Administration has indicated that all other itemized deductions in the tax code would be eliminated. “Health insurance premiums are not a ‘deduction’ so there’s nothing in this basic outline that speaks to taxation of health benefits,” says Scott Sinder, The Council’s chief legal officer.
The most interesting development is the Administration’s unwillingness to include the “border adjustment tax” that has been championed by Speaker Paul Ryan and House Ways & Means Committee Chairman Kevin Brady – a provision that would have taxed imports and subsidized exports. Many in the international commercial insurance marketplace were extremely agitated by the proposal, which would have included both goods and services – which presumably would have included insurance services.
Council lobbyist Joel Wood on the subject: “When a broker arranges for international placements, is that the export of risk from the U.S., or is that the importation of a product? While it is true that the U.S. is one of the only nations without some form of border adjustment, the only nation that applies such taxes on insurance is China. We’ve always been relatively serene that Congress would not ultimately enact such a sweeping provision. As the border adjustment debate isn’t going to simply go away, we will continue to be vigilant on implications for the commercial insurance industry.”
The Trump tax plan would eliminate taxes that mostly hit wealthy taxpayers, including the estate tax and the alternative minimum tax, while promising to “eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.”