[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 30 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 30

  To increase the unified estate and gift tax credit to exempt small 
             businesses and farmers from inheritance taxes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 21, 1997

   Mr. Lugar introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To increase the unified estate and gift tax credit to exempt small 
             businesses and farmers from inheritance taxes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Farmer and Entrepreneur Estate Tax 
Relief Act of 1997''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The economy of the United States cannot achieve strong, 
        sustained growth without adequate levels of savings to fuel 
        productive activity. Inadequate savings have been shown to lead 
        to lower productivity, stagnating wages and reduced standards 
        of living.
            (2) Savings levels in the United States have steadily 
        declined over the past 25 years, and have lagged behind the 
        industrialized trading partners of the United States.
            (3) These anemic savings levels have contributed to the 
        country's long-term downward trend in real economic growth, 
        which averaged close to 3.5 percent over the last 100 years but 
        has slowed to 2.4 percent over the past quarter century.
            (4) Congress should work toward reforming the entire 
        Federal tax code to end its bias against savings by eliminating 
        the income tax and capital gains tax and replacing them with a 
        broad-based consumption tax. A broad-based retail consumption 
        tax is the most effective tax system because it encourages 
        savings, is fair, its simple to comply with and to administer, 
        and it fosters exports.
            (5) Repealing the estate and gift tax would contribute to 
        the goals of expanding savings and investment, boosting 
        entrepreneurial activity, and expanding economic growth. The 
        estate tax is harmful to the economy because of its high 
        marginal rates and its multiple taxation of income.
            (6) The repeal of the inheritance tax would increase the 
        growth of the small business sector, which creates a majority 
        of new jobs in our Nation. Estimates indicate that as many as 
        70 percent of small businesses do not make it to a second 
        generation and nearly 90 percent do not make it to a third.
            (7) Eliminating the inheritance tax would lift the 
        compliance burden from farmers and family businesses. On 
        average, family-owned businesses spent over $33,000 on 
        accountants, lawyers, and financial experts in complying with 
        the estate tax laws over a 6.5-year period.
            (8) Abolishing the inheritance tax would benefit the 
        preservation of family farms. Nearly 95 percent of farms and 
        ranches are owned by sole proprietors or family partnerships, 
        subjecting most of these estates to inheritance taxes upon the 
        death of the owner. Due to the capital intensive nature of 
        farming and its low return on investment, many farm estates do 
        not have the necessary liquidity to meet their estate tax 
        liability and are forced to sell their land.
            (9) As the average age of farmers approaches 60 years, it 
        is estimated that a quarter of all farmers could confront the 
        inheritance tax over the next 20 years. The auctioning of these 
        productive assets to finance tax liabilities destroys jobs and 
        harms the economy.
            (10) Abolishing the inheritance taxes would restore a 
        measure of fairness to our Federal tax system. Families should 
        be able to pass on the fruits of the labor to the next 
        generation without realizing a taxable event.
            (11) Despite this heavy burden on entrepreneurs, farmers, 
        and our entire economy, estate and gift taxes collect only 
        about 1 percent of our Federal tax revenues. In fact, the 
        estate tax may not raise any revenue at all, because more 
        income tax is lost from individuals attempting to avoid estate 
        taxes than is ultimately collected at death.
            (12) Repealing estate and gift taxes is supported by the 
        White House Conference on Small Business, the Kemp Commission 
        on Tax Reform, and 60 small business advocacy organizations.

SEC. 3. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDIT.

    (a) Estate Tax Credit.--
            (1) In general.--Subsection (a) of section 2010 of the 
        Internal Revenue Code (relating to unified credit against 
        estate tax) is amended by striking ``$192,800'' and inserting 
        ``the applicable credit amount''.
            (2) Applicable credit amount.--Section 2010 of such Code is 
        amended by redesignating subsection (c) as subsection (d) and 
        by inserting after subsection (b) the following new subsection:
    ``(c) Applicable Credit Amount.--For purposes of this section, the 
applicable credit amount is the amount of the tentative tax which would 
be determined under the rate schedule set forth in section 2001(c) if 
the amount with respect to which such tentative tax is to be computed 
were the applicable exclusion amount determined in accordance with the 
following table:

In the case of estate of decedents  The applicable exclusion amount is:
        dying, and gifts made, 
        during:
        1998 and thereafter..........................    $5,000,000.''.
            (3) Conforming amendment.--
                    (A) Section 6018(a)(1) of such Code is amended by 
                striking ``$600,000'' and inserting ``the applicable 
                exclusion amount in effect under section 2010(c) for 
                the calendar year which includes the date of death''.
                    (B) Section 2001(c)(2) of such Code is amended by 
                striking ``$21,040,000'' and inserting ``the amount at 
                which the average tax rate under this section is 55 
                percent''.
                    (C) Section 2102(c)(3)(A) of such Code is amended 
                by striking ``$192,800'' and inserting ``the applicable 
                credit amount in effect under section 2010(c) for the 
                calendar year which includes the date of death''.
    (b) Unified Gift Tax Credit.--Section 2505(a)(1) of the Internal 
Revenue Code of 1986 (relating to unified credit against gift tax) is 
amended by striking ``$192,800'' and inserting ``the applicable credit 
amount in effect under section 2010(c) for such calendar year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying, and gifts made, after December 
31, 1997.
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