Presently, many insurance companies and other financial institutions sell annuities mainly to rich individuals. What makes these annuities very attractive to the rich who are at a very high effective income tax rate is that the income earned from the investments in these annuities grow on a tax deferred basis. So clearly, the main economic value of these annuities comes from the tax loophole embedded in them.
My recommendation here is that the income earned from annuities invested in by either high income or high asset individuals will be currently taxable as the income is earned. I'll leave it to the US Congress as to what constitutes a high income and high asset value for individuals.
