Does your employer have "Dead Peasants" Insurance

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How does your employer having an insurance policy on you negatively effect you? It's one of those things that "feels" wrong, yet once thought through isn't that big a deal. Now if they're actually trying to lower your health to collect, that's a whole other kettle of fish, and in that case I'd say you have bigger problems with your employer than what kind of insurance they carry.

It's a serious violation and should not be allowed. Moreover, one of the horrible things that Goldman Sachs did was to knowingly and fraudulently sell bad securities to people and then bet against them on the derivatives market. That is so incredibly offensive and that these people are not going to be brought to justice is proof that the system is broken and that people need to take stronger measures against these people. It's a pity there's no powerful labour organisations that can harass that scum and make their lives a living hell.

There is an important difference between insuring people that the directorate deems to be valuable (they are well-paid) and those considered nothing more than peons. In many cases, indeed they are in a situation where they're better off if the peons dropped dead. This is not acceptable in any civilised society.

Seriously, if the employer thinks so little of the employees, considers them so easily replaced with the Friedmanite reserve labour force, that the employee is forced to accept the pittance offered on the grounds that he or she is of little importance, then where is the logic of insuring such employees on the grounds that their value is such that it would disrupt the corporation if they happen to die. They don't believe that this is the case - if employees are so valuable that they must be insured, then pay them accordingly. This scum always has it both ways, doesn't it.

So, you think that there is something inherently wrong with companies using life insurance on low-level employees as a tax shelter, that is unrelated to the tax shelter elements of the idea?? I don't see the real issue. Life insurance on these people is a means to an end here, and the end in this case is just getting tax benefits. If there is anything to be opposed then it is only that particular end, but not much else that I see.


The logic is that this is a tax shelter. There is no reason for moral outrage, outside of the fact that the company is trying to avoid taxes. Even then, corporate taxes have a lot of problems, including these kinds of tax shelters(that are difficult to get rid of given how corporate income works), but also given how taxes bias companies towards debt instead of equity.

So they use it as a loophole to avoid paying taxes - so that their employees pay more. That they can do this suggests possession of a sort of the employees - a kind of slavery. These people are evil. Did you know that the world of high finance is full of the language of death? Talk of executions and tombstones and so forth?

So, here's what you are saying:
The tax requirements of the government are X. X=L+c If the contribution to X by the corporation (c) decreases, then the amount paid by the laborer (L) must increase.

Possession of employees though? No, it suggests that they've found a tax loophole. Insuring an asset that isn't owned really is just a form of betting.

Ok, so they use "the language of death"? I am not sure what you are even trying to say, but somehow I think you end up being a crazy leftist.

Well, I'm kind of outraged that the tax system is so screwed up that this kind of thing actually makes sense.

If the premiums are deductible, the benefits should be taxable. If the premiums aren't deductible, the benefits shouldn't be taxable. Someone messed up.

That is amazing and scary. If the company takes out an insurance policy on a worker then they have a motive to kill him or for him to have an "accident". I think it should be illegal to take out a policy on anyone except one's self, one's spouse or one's dependents (children and other legal wards). And for adult A to take out a policy on adult B, it should require B's consent.

ruveyn

Again, if a company is contemplating murder to raise revenue, there are far less complicated and more direct ways to go about it than insuring their employees and then, to coin a new murder related euphemism; "short selling" them (think about it, the principal is identical). At the very least, a sudden spike in claims at a particular company would spark an investigation from the insurer, a far more ruthless and relentless investigator than the government. After all they have a profit margin and shareholders to answer to, great motivators on both counts.

As to consent, how much do you want to bet that it's buried somewhere in the employment agreement/contract? I doubt most people even realize that they're agreeing to it when they sign the paperwork.

I guess there are all sorts of types of thinking out there. The weird thing to me, given that I am a tax professional, is that I had never heard of anyone trying to use the life insurance laws in this way as a tax shelter (there are some trust structures people use but that is different). I would say that none of the corporations I work with do - and I've worked with some that stretch ethics much further than I am comfortable with. The life insurance laws were written with a practical purpose, and accountants everywhere dutifully look for and pull out the expense of life insurance that isn't deductible. Playing with it for a purpose beyond which the laws were intended, and as described in that article just seems ... bizarre. OK, in this profession we take advantage of loopholes and play games with money all the time - if an area of law is gray, you take advantage - its just money, and the client gets to keep as much of it as legally possible. But it is also a profession that tries to have some ethics, and I get to study those every year in order to keep my CPA license. I guess I'm glad that I'm not working with corporations that wish to try to make money off of lost lives; corporations that have some sense that while certain things may be legal, they aren't right. Officer's life insurance is a practical must do. The other? Bizarre.

Let the buyer or the seller beware. One should read the fine print.

ruveyn

I dunno, I see a lot of the bias against it as part of our emotional/moral reasoning being somewhat upset by the notion of death. I dunno, if this were any other method of tax shelter, would this be seen as wrong?(for reasons other than questions about the legitimacy of tax shelters) For instance, let's say that there is an area where houses tend to be destroyed due to fires, so insurance payouts are practically guaranteed, the question is when not if. Would it be terribly wrong for a company to insure another person's house?

It wouldn't make economic sense ... the insurance company would know the fires happen more often, and the premiums would be higher to reflect the increased risk. Sorry, I can't see beyond the reality in this one.

I guess all hedging transactions are based in a kind of morbidity. As is bottom feeding off of foreclosures. I don't have any way on the bottom feeder clients, either - I've found them just as likely to play a game to not pay me as to play a game to not pay fair value for the house. That just isn't the world I want to live in.

I suppose that we could just sum this up as "stupid Americans" once again, voting against their own best interests.

Ordinary families who take out life insurance do not get a tax break on the premiums. Businesses do.

Back in 1962, Michael Harrington wrote a book called The Other America, which decried the American penchant for providing socialism for the rich, and free enterprise for the poor.

Shortly afterward, things got briefly better with the creation of Medicare, Medicaid, and expanded social security benefits.

But, boy have we been going downhill. Tax advantages for companies that take out life insurance against their own employees.

We are worse off now than we were back in 1962.

It is the Republican, Conservative menace that has brought this country to the bottom of an outhouse.

DW, it would make economic sense as a tax shelter though. The idea isn't to make money, it is to avoid taxes. Life insurance companies know that EVERYONE dies, just like in this example, housing insurance knows that everyone's house is going to burn down.

If companies are insuring large amounts of people though, then it can't be reasonable to hold to it as an investment. The more people you have, the less variability you have and the more likely an insurance company is to win.

The idea is more like this. Let's say that an insurance company takes in 100% of the money, but let's say that on average they pay out 80%(given all of the messy financial issues). Well, corporations usually pay about 40% in taxes(rounding, but who cares?), so, if a company can get 80% of their money through using life insurance where as they'd pay 40% if they didn't do the life-insurance thing, then it is more beneficial to use life insurance, as they only lose 20% as oppose to 40%. Now, all of the numbers are made-up, but does this clarify?

A lot of transactions do have some morbidity to them. In this case though, I think the major party harmed is just the government loses tax revenue.

No, it's due to existing tax laws. Businesses are only taxed on their profits, not on their gross income or losses. What this means is that if businesses increase their expenses then they can get out of some taxes. Insurance is an expense. Therefore they get a tax break on premiums. It is hard to see a world in which we tax businesses on a flat rate without keeping in mind the other elements of the industry.

I don't share in most of your feelings about this. This is a loophole, and one that exists due to rules that make sense. It is not as if businesses are just "evil" here or politicians have "invented a loophole", but honestly I don't think anyone would want for taxes to push businesses into net income losses.

That being said, tax laws for companies are full of nonsense that causes all sorts of problems. For example, if a company gets debt, then they now have more in expenses, which reduces the taxes they pay. However, if a company gets equity, then they have to pay more in taxes. What this results in is that companies finance themselves more heavily with debt than they would if these tax rules didn't exist. The problem is that debt increases the riskiness of a company. So, in essence, what we have with a company is a tax law system that increases the instability of the economy. Additionally, another issue is that taxation on companies passes through to some extent(because costs of all forms pass through), and so what this means is that the higher corporate taxes are, the more people will have to pay for goods and services, meaning that corporate taxes also hurt everybody in the economy.

It also isn't as simple as a business buying insurance and getting a deduction. Many kinds of life insurance are NOT deductible by a corporation. The tax scheme they are talking about is quite a bit more layered.