Evening star., 1908-12-04
BIG TAX PAID ON INSURANCE
$11 ,OOO, 900 GIVEN TO STATES BY
PoLICYHoLDERs.
Uniform Rates Should Be Demand
ed, DR.. hartman Tells Life
Insurance Presidents.

NEW YORK. December 4.-That s11.-
100000 Of the funds of the life insur-
ance policy holders are each year di-
verted to the treasures of the various
suites of this country In the form of spe-
| cial taxes was the statement made by
Robert Lynn Cox general counsel and
manager of the Association of Life In
| surance Presidents at the afternoon
session of the annual meeting, which took
| the form of a conference on the necessity
for reform in life insurance taxation by
| the states. Mr.. Cox stated that this large
sum was paid in addition to taxes on real
estate and was usually based on the pre-
miums paid annually in each state by the
policy holders.
While the companies hand over the tax
| money to the states. Mr.. Cox declared
( that the policy holders actually pay the
taxes; that these special taxes result in
just so much lower dividends or higher
premium rates to the policy holders. The
rate of the premium tax ranges from one
half of l per cent in one state to . per
| cent in many, and to as high as per
Gent in one or two states. Mr.. Cox said
| that the first step toward securing jus
| tlce ioT lile pOllcy nOlOerS SnOuld De a
| reduction of the amounts charged by the
| hlgh-rate states, and thus bring about
| uniformity.
"This meeting should have been called a
| convention rather than conference" said
Mr.. Cox. 1t Is distinctly representative
Dody. You meet here the accredited
! delegates of about 10000 600 policy holders.
You are not here as confrereS concerned
with your individual and personal inter
ests the term conference might imply
u in In1i Toe, RI
| inequitieS of present rates and methods of
taxation of life insurance is not your per-
sonal problem except in so far as you may
| be policy holders yourselves. Any further
concern on your part arises from the duty
devolving upon you to look out for the in
terests of the policy holders you represent.
This meeting is therefore being held
mainly to discuss ways and means of
bringing legislators and policy holders face
TO face in dealing with the great burden
imposed upon policy holders by legislative
hands, that Of taxation by the states
In paper on Necessity for Reform of
Life Insurance Taxation Lester w.
hartman, Phi D., of Yale University said
that under the existing general property
tax system in force in most of the states
some tax ought to be levied on life insur-
ance. but that the best remedy would be
for the states to abolish the general prop
erty tax, or at least, to amend 1t in such
way as to include only tangible wealth
as subject to taxation. If this could not
be done. then direct tax on the policy
holder, based on the reserve value of his
policy, should be substituted for the pres
ent indirect tax. and each policy holder
would know just how much tax he had to
pay to his state.
THE policy holder pays too much to-
day said DIR. Zartman "He does not
object because he does not know how
much he is paying"
Right to Uniform Rates.
In conclusion DIR. hartman said that if
no other reform can be secured, the pol
icy holders have a right to demand uni
form rates of taxation by the various
states.
uniformity among the states. "he stat
ed. can be secured in two ways, by the
states with a low rate increasing their
rates to the level of the high rate states.
or by the high rate states lowering their
rates. 1t Is much to be desired that uni
formity should be obtained through the
decrease in rates by the high states. 1t
would be move in the right direction
Since some reform is better than none
and since it does seem possible at this
time to secure this much if nothing fur
ther can be secured, let us at least Sc
cure uniformity of rates of taxation upon
life insurance in the various states"
In an address on Life Insurance Taxa
ton In the United States.' John F. Dry
den. president of the Prudential Insur-
IF the German empire, with its vast
burden of military, colonial and other
expenditures far in excess of ours. re-
Trains from taxing it's life insurance policy
holders more than a quarter of l per
cent of the premium income there can
be no economic or political Justification
for imposing tax of per cent ,eight
times as much) upon the premium income
of American life insurance companies If
the great state of New York. with it's
a nf,6 frtv
lures of all kinds, refrains from taxing
life insurance companies more than |
per cent of the gross premium income I
| insist that there is no corresponding justi-
hcat1On on the part of other states to tax
life insurance companies at higher rate
IF the average rate were reduced to
one-half of what it is at the present time
and II 1t We're accepted as an established
practice in taxation that premium re-
celpts of life insurance companies should
under no circumstances be taxed more
than l per cent, there would at the pres
ent time be a saving to the policy holders
of about $5,OOO.OOO year, which would
revert to them in the form of larger divi-
dends Or a corresponding reduction in
premiums.
The problem before us is a practical
one. Life insurance is greatly overtaxed
The prospect of securing the general
adoption of a perfect system of taxation
Is too remote for serious consideration A
uniform premium income tax of I per
cent would be practical working basis
1t would more than repay the states for
their supervision and protection ard
would materially decrease the cost of life
insurance to the millions of American
policy holders"
Paper by S. B. Smith.
Samuel BoswOrth Smith of Chattanooga.
Tenn, president of the American life
convention. read paper entitled A
Message From the South and West"
After urging the necessity for harmonious
action generally among the life insurance
companies, Mr.. Smith said:
Under any circumstances the practical
accomplishment of tax reform is serious
one. The insurance taxes have come to
take recognized place in the revenue of
the states. At the present moment there
is sweeping over the country a wave Of
prohibition and liquor restrictions: every
where the curtailment of the saloon is
reducing the revenue.
This revenue must be replaced some
where, and it is going to be a difficult
proposition to show the people at this time
that the insurance tax can be reduced
Their natural tendency will rather be to
raise it. Take. for example, my own
state of Tennessee. The total income of
| the insurance department from premium
tax and licenses amounts to something
like 10 per cent of the total income of the