The Newark star and Newark advertiser. [volume] (Newark, N.J.) 1909-1909, 1909-09-21
INSURANCE
TAXES TOO HIGH
F. [. Hoffman, Prudential Statis-
tician, Urges Repeal of New
Federal Impost.

FREDERICK IL. dOllman, SldllsticidH VI
the Prudential Insurance Company OF
America. is attending the third inter
national tax conference at Louisville,
Ky. In an address on The Tax Prob
lem in Life Insurance" Mr.. Hoffman
said In part:
Legal reserve life insurance COM
panies In the United States are more
heavily taxed than in Canada, England,
Germany and many other leading
foreign countries. The companies Fay
In taxes, fees, licenses and for the cost
of State supervision more than sl2,oo0,-
900 per annum and since 1865 they have
paid out on this account more thai
$3.50. 000.0 900. The present tax ratio Is
equivalent to. 2.25 per cent. of the
premium income, and to 1.75 per cent.
of the total income, and the ratio has
increased from Ia per cent. In 1899 10
2.3 in 1908.
1.-The tax burden falls entirely uIol
the policy-holders, who constitute a
class which, because of their thrift,
prudence and self-denial, are rightfuly
entitled to special governmental con-
sideration and relief, for life Insurance
is In every way a distinct and materia
aid to the State in reducing public bur
dens, and in particular the cost OF
pauperism and public dependence.
1.-The present tax ratio is excessive.
and a material reduction Is called for.
1t is the consensus of qualified opinion
that the tax ratio should not exc ell
1 per cent. of the premium income, and
his view Is sustained by a thoroughly
competent and impartial investigation
-zna1 -, - rnaAt1 4@-1x.;tto1 20 +hn in
surance commissioners convention.
Under the present system the cost OF
insurance is increased and the earnesl
efforts of the companies to reduce the
cost are to that extent defeated. Over
taxation Is also a distinct menace to
the future of life insurance in the
United States, and the problem is made
doubly serious by the recently enacted
Federal corporation net income tax, "a
applied to life insurance companies.
"A Federal tax upon insurance for
revenue-raising purposes is uncalled
for at the present time. n no taxes
have ever heretofore been imposed
upon insurance except during times Of
war. The repeal of this tax at the
next session of Congress is urgently
called for, and the payments made dur
Ing the intervening period should be
refunded to the companies. To Illus
trate the incidence of the tax burden
upon the policy-holder, I may state
that If there had been no taxes or fees
of any kind in 1908 the benef1ciaries OF
legal reserve life insurance companies
would lave received $3.50 more for
every 500 actually received on account
of claim payments. If there had been
no taxes, fees, etc, $22.66 would have
been paid to policy-holders in addition
to every one hundred dollars receivee
in dividends.
"In Germany life insurance com
panles pay only "a cents In
against 1925 paid by legal reserve lie
insurance companies In America. In
| Canada the tax ratio is a trif1e over
l per cent, and in Australia the lead
ing company pays less than 10 per
cent. In England deductions are al
lowed to be made on account OF lie
insurance premiums, and the estimated
value of such deductions which would
otherwise have to be paid under the
income tax law is nearly two Ind a
half million dollars per annum, or ABOUT
the same amount as is allowed to
charitable institutions, hospitals n
friendly societies.
There is neither political nor eco
nomic justification for life insurance
taxation, and as far as practicable the
companies should be relieved from I'M
necessary burdens. No other business
interest is taxed as heavily as lie
insurance upon the gross income, ana
by every consideration of political
economy and public morality a reduce
ton in the tax rate of l per cent. Oh
the gross premium income Is
cally called for. In the words or Jonl
f. DRYDEN in his address on life lnsnr-
ance taxation: If the great State OF
New York refrains from taxing lille IN
surance companies more thai l per
cent. of the gross premium income L
insist that there is no corresponding
justification on the part of other states
to tax life insurance companies at a
higher rate
ut is to be hoped that this conven-
ton will give its unanimous indorse-
nent to this suggestion