Evening star., 1935-06-25
INSURANCE BLOW
SEEN IN TAX PLAN
Use of Various Devices Is
Expected to Avoid In
heritance Levy.
by DAVID LAWRENCE.


the Presidents tax program is adopted
by Congress?
Many people will answer that ques-
ton in different ways. Some will not
find It worth while to continue lie
insurance, some will seek by various
devices to transfer what they have
to foreign countries, some Will at
tempt to spread ownership Of their
estates by gift or sale in such manner
rs to reduce the inheritance taxes.
But of one thing the average man
may be sure: When the soak-the-
rich fury has spent itself, and the
budget is still unbalanced, the next
step will be to soak the poor.
Already Senator La Toilette is pro-
posing to reduce the exemptions for
married men who get $4,000 a year
and for unmarried men getting $1,000
q year. Certainly there are taxes
and taxes to come to pay for the
New Deal, and, while the rich are
perhaps uncomfortable in thought
Just now, 1t is nothing compared to
what the man of moderate means
Is going to have to pay when 1t is
discovered that, even if all the income
of the people who get $50, 900 a year
were conf1scated 100 per cent it prob
ably wouldn't be enough to pay the
current deficits of government.
Life Insurance Aspect.
One of the most interesting aspects
of the proposal to tax inheritances
on the same basis as income taxes
relates to life insurance. business
man in the Middle West, who asked
that his name be withheld from pub
licity, sent me copy of letter he
has just sent to all the different
life insurance companies with which
he had policies. Here Is what he
wrote:
at have read with great interest
the Presidents contemplated plan for
inheritance taxation. I will reflect
to you in this letter the results of
my thinking which likely parallels
that of the average property holder
In the Nation today
Assume for the sake of argument
that our estate including life insur-
snce is about s3,000,000, and of this
three million there is in the neigh
borhood of one million of life in
surance. The Federal estate tax first
of all is about $780, 900 on three mil
lion dollars. Then if the inheritance
tax schedule now proposed were to
parallel income tax rates. there would
be an additional So per cent taken by
the Government during the transit
ton of the estate to my wife and
daughter. thus leaving them approx
mately 100000.
Loss Is Three Fourths.
"I now pay annually about 5000
In life insurance premiums. The estate
tax and the inheritance tax if it Is
paid on this basis will take nearly
three-fourths Of this million of life
insurance. In other words, I am left
in a position of paying $40 900 year
in life insurance premiums for $780,
600 worth of life insurance that I
actually would be able to make de-
livery on those for whom it is in
tended. Obviously, no sane thinking
person would continue such a practice.
Much more easily could I go to
in a box or build home in Canada
with a steel compartment under the
basement floor or any one of q
hundred other possibilities rather
than work my life away on heads you
win. tails I lose basis in a business
in which the mortality rate is vastly
against my making any money any
way, and If by chance I am success
full. then to give it to the Government
and be unable to protect after I am
gone those love.
"As result of the above thinking,
naturally would Immediately cancel
my insurance, take the cash values
and cease playing a game in which !
have no chance to win Won't the
smaller man in his way and the larger
man in his way think exactly the same
as I do? Most assuredly big capital,
the capital which ventures forth with
hundreds Of millions that make pos
sible our great industries, our great
Improvements, our great development
will instantly cease in SO far as any
expansion is concerned. 1t will likely
degrade exactly as the railroad has
from Leningrad to Moscow, merely
flow along as best it can on momentum
with no thought or incentive whatever
Of rebuilding or developing.
Tax Severe for Small Man.
"The small man will likewise cancel
his insurance, because his inheritance
tax, while not as prohibitive as the
larger one, is yet so severe that it very
quickly would double and treble his
actual cost of insurance
Thus If the above reasoning will
bring an almost universal cancellation
OF life insurance down to a point of
$1,000 or even $25 900 policies, where,
then, does that leave the insurance
company and their stockholders?
Where does 1t leave the landowner
who is expecting to renew his mort
gage with the insurance company
when II natures? Where does it leave
the vast army Of people that are con-
nected directly or indirectly with in
eurance companies? And where, in
cidentally, has the incentive gone to
save money, where has the incentive
gone to develop business that would
II left alone employ large part of
the millions of persons that are today
on Federal relief rolls?
What inducement is there for me
TO continue year after year as I do2
What inducement is there to work
and worry and intensively pilot a
big organization through litization,
through Government harassment. and
find ultimately that I have worked a
lifetime for my Government?
"The answer Is that won't do 1t,
and I am no different from any aver
age, normal American citizen. If this
new inheritance tax law passes there
Is little doubt that what I will imme-
diately cancel all my life insurance.
What do you have to suggest regard
ing this matter? What viii your
conpany's answer be to this atua-