Financial freedom is worth protecting

The celebration of our nation’s independence brings many of us to reflect on the freedoms we enjoy as Americans. Our focus is often on those freedoms enshrined in the Bill of Rights: the freedom of speech, freedom of religion, freedom of assembly and others. But another freedom — financial freedom — was at the core of our nation’s founding and early development and remains crucial today. Financial freedom is also at the core of what insurance and financial professionals deliver throughout their careers.

Taxation issues were among the top grievances of the American colonists that led to the adoption of the Declaration of Independence we proudly celebrate every July Fourth. During the early republic, John Marshall, the fourth chief justice of the U.S. Supreme Court, famously wrote in the McCulloch v. Maryland decision that “the power to tax involves the power to destroy.” Marshall wasn’t referring directly to the impact of taxation on American businesses, families and individuals, but he easily might have been. 

As financial professionals, you are keenly aware that tax laws have a direct effect on the security and financial freedom of your clients and consumers across the country. Taxes and tax uncertainty can destroy even a well-made financial plan. We are currently at a pivotal point on tax policy at the federal level, making it vital for insurance and financial professionals to serve as political advocates on behalf of your businesses, clients and communities.

Tax policy comes to a head

We are all aware — it’s impossible to not be — that this is a significant election year. Election years tend to generate various tax reform proposals, and this year is no different. It’s true that none of the candidate tax proposals is likely to become the law of the land, but each one sparks debate and potentially lays the foundations for future tax laws. The situation is even more complex this year because most of the individual tax cuts in the 2017 Tax Cuts and Jobs Act are scheduled to sunset at the end of 2025.

The TCJA was the most significant federal tax code overhaul since 1986. It reduced the tax rates for most individuals and shifted the thresholds for several income tax brackets. It completely reworked the previous code’s web of exemptions, deductions and credits. Should provisions of the TCJA expire, which will happen without congressional action, individual tax rates across the tax brackets would increase, the standard deduction would be cut by 50%, the estate tax and gift tax exemptions would go down, and the income tax deduction for passthrough businesses would disappear.

Meanwhile, the federal budget deficit for 2024 totals $1.6 trillion and the national debt has grown to an unprecedented level. Another major tax reform is almost certainly on the near horizon. Insurance and financial professionals must be in the conversation and must contribute to the debate.

Our industry is on the agenda

Many of the tools you and your clients use to secure their financial freedom are likely to face increasing scrutiny. Those tools include the tax-deferred treatment of the inside build-up in whole life insurance; employer-sponsored retirement plan incentives; tax-preferred education savings; the tax exclusion for employer-provided health insurance; equitable income tax treatment of pass-through small business income; tax treatment of paid leave, long-term care, and disability insurance; and others.

As financial professionals looking out for the best interests of your clients, it is imperative for you to help them create sound plans that secure their financial freedom as well as to do all you can to ensure those plans aren’t derailed by lawmakers and regulators. That means being politically aware and involved.

At NAIFA, we advocate on behalf of insurance and financial professionals and your clients every day. Protecting the financial freedoms Americans enjoy is why we have filed a lawsuit to prevent the U.S. Department of Labor from restricting the choices of consumers preparing for retirement. It’s why we are a strong supporter of the Congressional Financial Literacy & Wealth Creation Caucus, co-chaired by Rep. Joyce Beatty of Ohio and Rep. Young Kim of California. It’s why around 500 of your colleagues went to Capitol Hill during the NAIFA Congressional Conference in May to meet with their lawmakers and represent all the amazing work you do for the American people.

I strongly urge you to work in the best interests of your clients and get involved. NAIFA is coordinating in-district meetings with lawmakers this August and September. Tax reform is high on our agenda, and the more voices we have the more influential our message becomes. You don’t have to be a NAIFA member to participate. You can learn more on NAIFA’s website at belong.naifa.org. 

Kevin Mayeux, CAE, is NAIFA’s CEO. Contact him at [email protected].