President Obama's $3.2 trillion deficit reduction plan includes "tax breaks" as the main targets for bringing in more revenue. Many of the specific tax changes will hurt the insurance/financial advisor industry and its clients:

• Raise tax rates on individuals earning more than $200,000 and families earning more than $250,000 to pre-2001 levels;
• Limit the value of deductions and all other tax benefits (possibly including inside buildup and/or death benefits) for these same taxpayers;
• Return to 2009 estate tax rules ($3.5 million exemption; 45% top rate);
• Effectively limit COLI policies to 20% owners (no other officers, directors or key employees) for new policies issued after 12/31/2012;
• Limit the dividends received deduction for separate accounts held by life insurance companies;
• IRS authority to reclassify independent contractors as employees even where there was a reasonable basis for the independent classification; and,
• Increase unemployment insurance taxes for employers.

The Plan calls for additional tax reform that would cut inefficient and unfair tax breaks while lowering marginal tax rates and increasing job creation. No millionaires will pay lower tax rates than middle-class families which will likely require raising tax rates on capital gains and dividends.

In 2017, the Plan indicates significant impact on Medicare clients:

• Further increase on Medicare Part B and Part D premiums for higher-income beneficiaries;
• Impose a surcharge on new purchasers of Medigap policies, equivalent to about 15% of the average Medigap premium; and,
• Increase the Medicare Part B deductible by $25 every other year.