But what I'm most concerned about is what's not in this package and what's going to be demanded of Wall Street when the tobacco settlement falls apart because the revenues for spending will have to come from someplace else. Insurance companies warned yesterday that the Clinton proposal would make some annuities less attractive investments. The administration's plan targets variable-rate annuity holders, who currently can switch their investments among several different funds but avoid paying taxes on any gains.
Investors pay tax on the income they receive from the annuity after they retire.
The proposal also would tax insurance companies at a higher rate when they maintain reserves against their annuity contracts that are larger than necessary to cover payments to investors. Meanwhile, Clinton, in a clear challenge to Republican lawmakers, many of whom want to eliminate the estate tax altogether, would make it harder to use insurance to pass money to heirs tax-free and to use various valuation techniques to reduce the value of nonbusiness assets when the estate tax is assessed. That change would sharply reduce the appeal of insurance trusts, a widely used estate-planning device. Clinton also would eliminate personal residence trusts, a method of transferring a home to heirs at a reduced value, and eliminate various discounts normally applied to assets in an estate when the dead person owned a partial interest. REIT shares have fallen in stock market trading during the past few days, when word of the provisions seeped out.