[Congressional Record Volume 143, Number 79 (Monday, June 9, 1997)]
[Senate]
[Page S5413]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FAIRCLOTH (for himself and Mr. Helms):
  S. 849. A bill to amend the Internal Revenue Code of 1986 to increase 
the unified estate and gift tax credit to exempt farms and small 
businesses from estate taxes, and for other purposes; to the Committee 
on Finance.


     the American Farm Heritage and Small Business Preservation Act

  Mr. FAIRCLOTH. Mr. President, I rise to introduce the American Farm 
Heritage and Small Business Preservation Act, and I am joined by the 
senior Senator from North Carolina. The act excludes the first $1.5 
million of estate and gift assets from taxation, and it carries an 
effective date of January 1, 1998.
  The act will relieve the tax burden that befalls farmers and small 
businessmen upon the death of the proprietor. There is truth in the old 
axiom that farmers ``live like paupers and die like kings,'' and, in 
fact, the IRS reports that farmers face estate taxes six times more 
often than other Americans.
  There are numerous estate and gift tax relief bills in the 
congressional hopper. However, I favor a straightforward approach, and, 
rather than require some form of participation in the business 
operation for a fixed period of time--and thus permit the IRS to 
establish nebulous and complicated regulations--the American Farm 
Heritage and Small Business Preservation Act proposes a simple $1.5 
million exclusion for all estates.
  The estate tax encourages the demise of the family farm and forces 
heirs to mortgage their agricultural heritage to the IRS. The estate 
tax is not a threat to just large farmers: some 20 percent of farms 
that report annual sales over $50,000 will trigger inheritance taxes. 
Indeed, the nature of a farm operation--75 percent of farm assets are 
nonliquid--complicates the difficulties inherent in the payment of 
estate taxes for farm families, and the financial structure of a farm 
thus further contributes to this erosion of our agricultural heritage. 
The average annual return on farm assets is just 4 percent, and the 
addition of mortgage obligations reduces the return to a mere 0.5 
percent, so it is almost impossible for the next generation to continue 
to farm the family land.
  As metropolitan areas continue to grow and encroach upon the farms 
that sit outside these areas, the value of the farms increases, and it 
drives up the estate tax burden. This pattern forces heirs to sell the 
farmland to developers rather than continue their agricultural 
heritage. Further, the Agriculture Department estimates that 500,000 
farmers will retire over the next two decades. The failure of the 
Congress to reduce the impact of estate taxes thus threatens the 
continued operation of almost one-quarter of the farms in the United 
States.
  I am thus committed to estate tax relief for American families. The 
IRS is a tax collection agency, not a board of directors, and 
Washington does not deserve a windfall from every funeral.
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