Spending too much and not enough income to back it up. Reminds me of me before I cut up my credit cards (thank you Dave Ramsey)
President Obama and Congress seem to be on a mission to uncover new sources of taxation to support everything from an overzealous financial bailout to universal health care. They have already put the high net worth population on notice that they can expect to get whacked.
My concern is for life insurance and the protection it has given to families over the last 150+ years with it’s non income taxable death benefits. That little feature is probably one of the most crucial components of life insurance. When a person has a $500,000 life insurance policy they know that if they die their family will receive the whole half million, not $250,000 after it bumps them into a higher tax bracket or some other variation on that theme.
I don’t carry the amount of life insurance I have so that my wife will have what she needs to get by plus what it will take to pay income tax on the death benefit. If Congress tries to tax life insurance benefits (which btw the state of Oregon is already trying to do) they will raise the amount of insurance a family needs to carry to net enough to meet their needs. This will raise the price a family has to pay and since most of us are on budgets it will result in many carrying less life insurance than their family truly needs.
This isn’t on the table in Congress yet, but they seem to be in the no stone unturned mode, so hang on.
Bottom line. In the current fervor to solve all problems for everything all at once, people are inadvertently being taxed in some cases and blatantly in others. Congress and the President need to keep their hands off of the one tool that can keep families from becoming a burden on society, tax free life insurance.