The insurance industry has escaped added taxation in the long-anticipated legislation that was introduced on Oct. 25 by Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee.
Rangel's Tax Reduction and Reform Act of 2007 proposes to end the impact of the alternative minimum tax by closing loopholes and raising taxes on those who earn more than $250,000 a year.
It also proposes to restore the overall limitation on itemized deductions and the phase-out of the deduction for personal expenses to the same extent that existed before the 2001 tax cut legislation gained by President Bush.
Under the Rangel bill, the differences between present law limitations and the complete restoration of these limitations would be phased in for taxpayers with adjusted gross income between $250,000 and $270,000, and between $500,000 and $520,000 for those filing jointly.
But it would be raised immediately for those with incomes above $250,000, or $500,000 for those filing jointly.
But, unlike industry anticipation, the bill unveiled by Rangel did not embrace language proposed earlier this year in the Senate Finance Committee that would cap annual contributions to non-qualified deferred compensation packages.
The bill would repeal the AMT, which is estimated to cost $800 billion over 10 years, through a package of tax increases on the wealthy and closing of tax loopholes. The revenue yielded by the increases suggested by Rangel's legislation is estimated at $1 trillion over 10 years.
Two provisions potentially affecting the financial services industry would bar hedge fund managers from using offshore tax haven corporations to defer taxes on compensation received for providing investment services, raising $23 billion.
