Insurers push death tax to profit from its effects

JackAbramoff once got paid by an Indian tribe to lobby for the reopening of a casino closed by a previous Abramoff lobbying effort. In the current debate over taxes, the life insurance lobby is pulling a similar stunt: Fighting to preserve tax-free death benefits as key to protecting family businesses while also lobbying to reinstate a 45 percent estate tax.

With estate taxes being debated on the House and Senate floor as the 2001 tax rates are set to expire, Democrats truck out their class-warfare talking points. Rep. Chris Van Hollen, D-Md., in an op-ed calling for a 45 percent tax on all estates over $3.5 million, taunted Republicans for wanting to “give a windfall to heirs such as Paris Hilton.”

This imagery is straight out of a 2005 pro-estate tax television ad titled “Leave no Heiress Behind,” featuring a Paris Hilton look-alike praising full estate-tax repeal. Those ads, part of a larger campaign against permanent repeal, were paid for by the Coalition for America's Priorities, an ad hoc group funded by the life insurance lobby.

Marc Cadin, a top lobbyist at the Association of Advance Life Underwriters, which had hired politically connected Democratic lobbyists to run this “heiress” campaign, bragged about it to a trade publication: “Members of Congress do politics for a living … so coming up with what's dubbed the Paris Hilton tax cut was sure political genius.”

But AALU is a small player in the fight to save the death tax. The American Council of Life Insurers and the National Association of Insurance and Financial Advisors are the big guns on Van Hollen's side.

ACLI, with its $7 million-plus annual lobbying budget, juggles a lot of tax issues, not just the death tax. Former Oklahoma Gov. Frank Keating, the head of ACLI until last month, recently told the Wall Street Journal that life insurance is key to “helping small businesses survive the death of a founder,” in the Journal's words. In this light, Keating defended the tax exemption for death benefits: “Declaring war on people who are savers and investors is not a positive agenda,” he said.

But Keating spent half his time at ACLI waving the class war flag — when the death tax was on the table. “I am institutionally and intestinally against huge blocks of inherited wealth,” he said during the 2005 push to permanently repeal the tax. “I don't think we need the Viscount of Enron or the Duke of Microsoft.”

NAIFA lobbyist Magenta Ishak recently wrote on the group's blog, “NAIFA was formed over a century ago to focus on improving the business livelihoods of its members and helping American families secure their futures.” But NAIFA is doing exactly the opposite when it lobbies to save the estate tax.

It's stunning, even by K Street standards: The life insurance lobby spends millions to create the conditions (a high inheritance tax) from which it then promises to protect customers with its tax-free insurance products. Life insurance companies are lobbying against the interests of their own customers.

The industry hopes its 45 percent proposal (with a $3.5 million exemption), drafted by outgoing Rep. Earl Pomeroy, D-N.D., can make it into the House bill after the Senate bill set a 35 percent rate and $5 million exemption. Pomeroy said he will vote against the tax bill without his estate tax provision.

Pomeroy is known as the life insurance industry's best friend in the House. Met Life was Pomeroy's top source of campaign funds this past election, and over his House career, New York Life claims that crown, according to the Center for Responsive Politics. He was — by a 25 percent margin — the top House recipient of insurance industry money in the 2010 election (this includes casualty insurance and health insurance).

Roll Call reported in January that Pomeroy was “said to be in the running to fill former Oklahoma Republican Gov. Frank Keating's post” atop ACLI, corroborating an AP story Pomeroy had denied. ACLI spokesman Jack Dolan said his group had considered Pomeroy for the top job back in 2003.

Republican former Gov. Dirk Kempthorne got the ACLI spot, but Pomeroy isn't the industry's only Democratic friend. New York Life, Met Life, AALU, and ACLI all favored Democrats with donations in 2010 — ACLI by a 2-to-1 margin.

Keep those insurance industry donations in mind — along with the industry's lobbying tactics — as House Democrats demagogue the estate tax.

Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on ExaminerPolitics.com.

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