There won't be many celebrations marking today as the 100th anniversary of the passage of the 16th Amendment to the U.S. Constitution, giving Congress the authority to enact an income tax. No parades. No fireworks. Not many speeches by public officials.
It didn't even make History.com's "This Day in History" list (where it doesn't rate up there with such momentous events as Cassius Clay's knockout of Sonny Liston in 1964, the opening of the first drive-in movie theater in Miami in 1938, and the British surrender of Fort Sackville during the American Revolution in 1779).
Yet, the ratification of the Amendment and Congress's subsequent passage of the income tax code, called the Revenue Act of 1913, later that year are very important in the history of life insurance.
The 1913 Revenue Act was considered a major reform that was championed by Southern and less populated states and opposed by Northeastern states. (How’s that for a reversal of red versus blue?) For life insurance practitioners of all political stripes, the practical reality was that the Revenue Act’s income exclusion for life insurance encouraged people to purchase needed life insurance coverage. That need always existed, of course, and skilled life insurance professionals of the day were quite capable of selling the need. But the fact that the income tax code highlighted life insurance with a special provision helped spread the word about life insurance to people in all economic strata.
The tax treatment of life insurance and annuities has been around so long that it is easy to forget why it was created in the first place. This may be true for some current members of Congress and their staff. That’s understandable since none were around in 1913, and Congress has a lot on its current plate.
This lack of institutional memory will be one of the challenges facing the NAIFA members who will be attending the NAIFA-sponsored Congressional Conference April 8-9. The NAIFA members will have to bring the members of Congress to the sales table, so to speak, to help them understand how life insurance and annuities uniquely meet the needs that most people have for personal, family and business financial security.
Real life stories of how life insurance and annuities saved families, businesses and individuals from living too long or dying too soon or provided for cash-flow needs in between are very moving. Each Congressional Conference participant will have such stories. Tell them.
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