[Congressional Record Volume 142, Number 126 (Friday, September 13, 1996)]
[Senate]
[Pages S10555-S10556]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THURMOND:
  S. 2074. A bill to repeal the Federal estate and gift taxes and the 
tax on generation-skipping transfers; to the Committee on Finance.


                        estate taxes legislation

  Mr. THURMOND. Mr. President, I rise today to join my colleagues in 
discussing reform of our tax system. I commend the Senator from 
Georgia, for his leadership on this issue. I wish to address another 
aspect of our unfair tax system--the estate tax.
  Today I am introducing a bill to repeal the Federal estate and gift 
taxes and the tax on generation-skipping transfers. This bill is very 
simple. It repeals, in its entirety, subtitle B of the Internal Revenue 
Code of 1986. This repeal is effective for estates of decedents dying 
and gifts and generation-skipping transfers made after the date of 
enactment.
  Mr. President, the Federal estate and gift tax structure is perhaps 
the most unfair and inefficient revenue source used by our Government. 
First, these taxes represent multiple taxation on savings and 
investment. Income is initially taxed when it is earned. If any of that 
income is saved, the earnings on the savings are taxed. A third level 
of taxation occurs as capital gains taxes are paid. Finally, after a 
lifetime of savings and investment, estate and gift taxes are assessed. 
Estate and gift tax rates are much higher than income tax rates.
  Second, these taxes inhibit economic growth and job creation. Family 
owned businesses, farms, and ranches are the source of most new jobs 
created in the United States. Yet it is these family owned businesses 
that are most affected by estate and gift taxes. In many cases, family 
businesses do not have sufficient liquid assets to pay estate taxes 
upon the death of the owner. Frequently the business is liquidated or 
they sell the farm. As a result, jobs are lost and economic activity 
ceases.
  Estate and gift taxes further stifle economic growth because of the 
increased cost for capital accumulation. When lifetime savings are 
taxed at high rates, the incentive to save is reduced. Spending and 
consumption replaces savings and investment. As a result, wage rates 
and employment suffer.
  Third, estate and gift taxes result in economic inefficiencies, as 
taxpayers attempt to avoid or minimize these taxes, or allocate 
resources for estate planning. A survey by the Center for the Study of 
Taxation found that 80 percent of owners of family businesses reported 
taking some steps to plan for estate taxes. Such mechanisms included 
life insurance, buy/sell agreements, restructuring family partnerships 
and trusts, and charitable bequests. According to a report on this 
survey, 62 percent of the family businesses stated they would not have 
spent the time or money on estate planning. They did so because they 
felt estate and gift taxes threatened the survival of their businesses.
  Mr. President, with all the negative economic consequences resulting 
from estate and gift taxes, one must ask if these taxes are worth the 
cost. I, and many others, have concluded they are not.
  There is a misconception that such taxes only affect the very wealthy 
and that these taxes generate large amounts of revenue. The fact is, 
these taxes impact everyone, directly or indirectly. Furthermore, these 
taxes are a minor revenue source for the Federal Government, accounting 
for only 1 percent of total Federal receipts. The amounts actually 
collected must be offset by the billions spent each year for 
enforcement and compliance activities.
  Mr. President, it is time to abolish Federal estate and gift taxes. 
These taxes are unfair and inefficient. They hinder economic growth, 
destroying family businesses and jobs. They result in resources being 
diverted to estate planning activities, away from economic growth. 
These consequences, as well as the actual costs of collecting these 
taxes, do not justify such taxes or the minimal revenues they produce. 
I urge my colleagues to support repeal of the Federal estate and gift 
taxes. I ask unanimous consent that a copy of the bill be printed 
following my remarks.

                                S. 2074

       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 ``Estate and Gift Taxes Repeal 
     Act of 1996''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) The Federal estate and gift tax structure is an unfair 
     and inefficient revenue source. Such taxes represent a 
     multiple tax on earnings. After paying income taxes, capital 
     gains taxes, and property taxes, lifetime savings are finally 
     subjected to estate taxes at rates that are generally higher 
     than income tax rates.
       (2) Owners of family-owned businesses and farms are among 
     those who suffer the greatest impact of such taxes. Many 
     businesses fail after the death of the founder because of 
     estate taxes. Families faced with these taxes are often 
     forced to liquidate farms or businesses to pay estate taxes. 
     In the process, jobs and financial security for family 
     members and employees are destroyed.
       (3) The estate tax results in inefficiency in the economy 
     because of ``estate planning'' and other tax avoidance 
     mechanisms.
       (4) Estate and gift taxes have a negative impact on 
     economic growth. Such taxes foster spending and consumption, 
     rather than savings and investment. Repeal of these taxes 
     would result in increased capital formation, additional jobs, 
     and a higher gross domestic product. Increased economic 
     activity and investments would also result in additional 
     personal and corporate income tax revenues.
       (5) Estate and gift taxes are a minor revenue source for 
     the Federal Government. In fiscal year 1995, estate and gift 
     taxes accounted for only 1 percent of total Federal receipts. 
     Furthermore, the Government spends billions of dollars each 
     year for administrative and compliance costs for these taxes.
       (6) The repeal of Federal estate and gift taxes is 
     consistent with and will be a major step toward establishing 
     a tax code based on fairness, simplicity, neutrality, 
     visibility, and stability.

     SEC. 3. REPEAL OF FEDERAL TRANSFER TAXES.

       (a) General Rule.--Subtitle B of the Internal Revenue Code 
     of 1986 is hereby repealed.

[[Page S10556]]

       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to the estates of decedents dying, and gifts and 
     generation-skipping transfers made, after the date of the 
     enactment of this Act.

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