LET’S TACKLE INSURANCE!

I have always hated insurance. But it seems to be a necessary evil. The primary purpose of insurance is to mitigate risk, either on property or people. Here are the differences between our present income tax system and the FairTax:

Income Tax system: The entire premium is paid with after-tax dollars.
FairTax: Only the monthly premiums are taxed, with pre-tax dollars.

Income Tax system: Insurance cash values grow tax deferred.
FairTax: Insurance cash values grow tax free.

Income Tax system: Cash values are taxed upon withdrawal.
FairTax: Cash values are withdrawn tax free.

Income Tax system: Benefits received are tax free today
FairTax: Benefits are received tax free.

To avoid double taxation, the Income Tax system taxes the premiums, but not the benefits. The premiums are made with after-tax dollars and they are not allowed as a deductible on your income taxes.

The Fair Tax taxes the premiums, but the benefit is received tax free. The proceeds are taxed as spent; therefore, there is an insurance credit paid out on the benefit to avoid double taxation.

That’s enough for today – more tomorrow.