Once again if you don't like it, complain to the IRS, who allows it to happen. I don't see what the outrage is about if the companies are following the law.

Then why do you think they do it?

Government makes stupid-ass rules then, upon learning that its stupid-ass rules have unintended consequences, endeavors not to repeal the stupid-ass rules in question but rather to enact another set of stupid-ass rules that will have their own unintended consequences, leading to still more stupid-ass rules. If this doesn't call for a "standard," I don't know what does.

What's so horrible about it, though?

I have no good reason to have a Dogs Playing Poker picture on my wall, yet I've got one. My neighbor thinks these paintings are incredibly tacky.

There would be no point if there wasn't a tax incentive. For CEOs and the such there is a financial incentive to insure them. For people who don't effect the "bottom line" in any meaningful way, it would be the same as picking random people. It's not +EV without the incentive

This is proving to be a good thread for highlighting the need to seek the ROOT cause of said "problems" imo.

I never said government was NOT to blame. I'm all for decreasing spending, but this is a problem to be attacked from both sides. Increasing revenue and decreasing spending balances the budget. Closing pointless tax loopholes that create incentives for insurance policies that have no "natural" purpose. Put it this way, if the payout from the insurance program was taxed at the same rate as the original money, how many of these policies would exist? The answer is none on regular workers, they'd only be used on executives.

This amounts to government enabled corporate "money laundering." They're taking tax eligible money, and running it through a string of transactions to make it tax free.

They do it to increase profits, so let me rephrase. There is no natural use for the insurance policy as it is intended.

But your neighbor isn't indirectly paying for your Dogs Playing Poker picture.

Let me put it this way. If tomorrow, the government decided to wave all taxes and keep spending the same, what would happen? Basically, the dollar would inflate massively because our deficit would balloon... So we wouldn't be paying "taxes" but every dollar earned would be worth less.

By companies not paying their rightful taxes due to a shady loophole, the budget deficit is larger than it otherwise would be. This adds to inflation and makes every dollar worth a little less. Thus, we are all sharing the companies' tax burden. You're paying some of Wal Mart's, etc's tax responsibility because of this loophole.

This is as much a subsidy for the Life Insurance industry as it is for the corporations taking out the policies and I agree it should be done away with. But even while its available the major problem I have with the way corporations go about doing this is that they basically trick the employee (remember these are low level line employees who are not going to be taking their HR paperwork to a lawyer for review) into giving them permission to take out the policy by burying the language in legalese that accompanies a token (few thousand dollar benefit typically) life insurance policy that's presented as a "benefit" along with the other benefits a new hire receives. For all of you who argue that there's absolutely nothing wrong with this morally, I'd say the fact that companies don't come right out and ask for permission to take out the policy in plain English is pretty telling.

Telling of what?

That the company acknowledges that the practice would at the very least look bad were it out in the open. A number of companies (Walmart being the most noteworthy) have publicly stopped the practice after getting called out on it in public.

I agree with this. So faced with this problem (blatant exploitation of unskilled and uneducated workers made possible by a stupid government policy), the question remains for to fix it. One option is "pass a law that prohibits this specific exploitation of the deduction. Another is "eliminate the deduction altogether." A third is "overhaul the tax code." I think the likelihood of adoption is 1,2,3 and the effectiveness ranking is 3,2,1.

Well in theory, the fact that a 3rd party owns a policy on your life could prevent you from getting as much insurance for yourself as you may wish.

Pretend if you can that there is no government. Now what exactly is money laundering?

If it's meaningless except as "stuff government says you can't do with your money" then why are you calling "stuff government allows" money laundering?

Obviously overhauling the tax code would be good, but this is hardly going to be the catalyst for such an endeavor.

I wouldn't eliminate the deduction (that's just the general interest expense deduction which is problematic but outside the scope of this problem imo), I'd just make the benefit taxable in cases where the originator and beneficiary are both third parties. Problem solved.

Does this really qualify as "blatant exploitation of unskilled and uneducated workers made possible by a stupid government policy?" Is there any evidence that anyone was actually harmed as a result of this policy?

I'd also bet that the vast majority of the people who were "tricked" into agreeing to this would've have happily done so if it were explicitly explained to them at the time of their hiring.

You seem to be assuming there is some "natural" level of tax revenues and further that there is some "natural" level of taxes that any given company should be paying.

I decided to retire, in doing so my tax liability dropped to zero since I have no income and just live off of my savings. Am I "stealing" since I used to pay a lot of taxes?

When I earn money I create a tax obligation. When I give it to charity the obligation goes away. Is this government aided tax evasion or government aided money laundering?

Edit: Better example. I open a traditional IRA. What do you think of that?

Absent getting rid of the tax code that incents the practice I'd be fine with a stipulation that permission to take out the policy must be granted via a separate document which clearly spells out the right that's being granted by the employee to the company. Somehow I think the Life Insurance industry would fight just as hard against this provision as it would against eliminating the tax incentive.

Obviously you are stealing from your neighbor by not buying one of his "Elvis on Velvet" paintings imo.

Perhaps it was the wording of your title that threw me off, you said Corporate America was stealing 'our' money, they aren't stealing anyone's money they just found a way to keep a greater percentage of their money.

No, you've done well for yourself. Your money has already been taxed. Say we have a juice company that made 200 million this year. So they would probalby owe something like 50-60 million in taxes? I don't know how high the rates get on corporations. But the numbers being exact is not the point. Then then take the 200 million, but a bunch of this life insurance policies and write the money off the books as debt - its tax deductible now, those debt payments.

Now, lets say everyone dies the same day just to simplify our example. They collect like 185 million, the insurance company made like 15 million off the profits, and now the 185 million is tax free. Our juice company just saved 45 milion in taxes. Our insurance company made 15 million.

All of that came off of what should have been tax revenue. That should have been 60 million going towards our expendetures, shrinking the deficit, helping the dollar hold on to a little bit of value by limiting inflation a bit.

You could word it that way. They've found a loophole to not pay as much on their taxes. When numerous large corporations do this, it means less tax revenue and higher deficit... The higher the deficits run the more risk of inflation, then everyone's dollars are worth less and we've all been taxed that way.

Essentially they are finding ways to toss their tax burden back into the pool so everyone can soak up a bit.

I know its pretty common for lawyers to take out life insurance on each other. Is this why?