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Reagan's Tax Proposals

July 21, 1985

I have followed with great interest the media coverage concerning the various tax reform proposals. Everyone agrees that we need to make our tax system simpler and fairer. I'm in total agreement with the principles of the reform movement, but in the name of tax reform Congress could jeopardize the future financial security of millions of Americans.

For example, many American workers are provided life, health and pension benefits by their employers. Taxing these employee benefits would not reduce the need for such benefits, but would tend to reduce the coverage provided by the private sector. Government at all levels would come under pressure to make up the shortfall.

Another point concerns the millions of people who purchase permanent individual life insurance policies.

What the Administration proposes to do is to tax people on the annual increase in the value of their individual life insurance policies. This would be like taxing the annual increase in the value of your home--even though you haven't received any cash income from the appreciation in value. The current tax exclusion on the annual increase in value of permanent life insurance policies is not a tax loophole for the rich. It is an inducement to millions of low- and middle-income Americans to provide for the protection of their families. Life insurance policies have been exempt from taxation ever since the inception of the income tax in 1913.

To change the current tax treatment of individual permanent life insurance represents a tax shelter for the wealthy, but such a charge doesn't bear up under examination. In 1983, the average life insurance policy in force was $18,000, and two-thirds of the policies sold were on the lives of people earning less than $25,000 annually.

I believe that it has been demonstrated that we have an effective and cost-efficient system of health, pension, group life and individual life insurance protection in this country today.

I hope that our representatives in Washington will look carefully at the implications of the various tax reform proposals. For the majority of working Americans, these changes will directly and negatively affect our personal tax situation, our financial security and stability of the life, health and pension protection that we receive from the private sector.

ELIZABETH J. SAMPSON

Los Angeles

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