[Congressional Record Volume 145, Number 105 (Thursday, July 22, 1999)]
[Extensions of Remarks]
[Pages E1638-E1639]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




HONORING STATE SENATOR MARK HILLMAN, REPRESENTATIVE BRAD YOUNG, AND THE 
                       COLORADO GENERAL ASSEMBLY

                                 ______
                                 

                           HON. BOB SCHAFFER

                              of colorado

                    in the house of representatives

                        Thursday, July 22, 1999

  Mr. SCHAFFER. Mr. Speaker, Colorado State Senator Mark Hillman and 
State Representative Brad Young have advanced a Resolution in the 
Colorado General assembly important to the debate we are about to 
engage about tax relief. Adopted this year by the Colorado General 
Assembly, Senate Joint Memorial 99-004 urges us to repeal the Federal 
Unified gift and estate tax.
  Mr. Speaker, one of our colleagues has observed that only with our 
government are you given a certificate at birth, a license at marriage, 
and a bill at death. One of the most compelling aspects of the American 
dream is to make life better for our children and loved ones. Yet, the 
current tax treatment of a person's life savings is so onerous that 
when one dies, the children are often forced to turn over half of their 
inheritance to the Federal Government. The estate tax is imposed at an 
alarming 37 to 55 percent rate. This is higher than in any other 
industrialized nation in the world except Japan. Even worse, not only 
does this take place at an agonizing time for the family,

[[Page E1639]]

but they also have to watch their loved one's legacy be snatched up by 
the federal government--an entity not known for great wisdom in 
spending money. This is as wrong as it is tragic. And it dishonors the 
hard work of those who have passed on.
  The purpose of the estate tax, or ``death tax'' as many call it, has 
evolved over time. It has been enacted three other times in our 
Nation's history as a way to help fund wars--the naval war with France 
in 1797, the Civil War in 1862, the Spanish American War in 1898, and 
World War I. Although it was repealed within 6 years in each of the 
first three instances, in 1916 the Federal Government put its hand in 
the pocket of Americans to fund WWI and never took it out. Over time, 
the tax began to reflect political philosophy as liberal politicians 
sought to break up what they perceived to be the concentration of 
wealth in society by heavily taxing estates. It has become less of a 
tax on wealth, however, and more of a tax on the accumulation of wealth 
of those who are trying to get ahead and save for the future.
  It is the small businesses and family farms that are particularly 
vulnerable to the death tax. Asset rich and cash poor, these 
enterprises do not have the liquid resources to settle a tax bill of up 
to 55 percent with the Federal Government. Their only option is to sell 
some or all of the land or business, thereby diminishing the asset 
generating the wealth for that family.
  Today, less than half of all family-owned businesses survive the 
death of a founder and only about 5 percent survive to the third 
generation according to the Life Insurance Marketing Research 
Association. Under current tax law, it is cheaper for an individual to 
sell the business prior to death and pay the individual capital gains 
rate than pass it on to heirs. This is terrible public policy.

  The amount of money spent complying with, or trying to circumvent, 
the death tax is astronomical. Congress' Joint Economic Committee 
reported that the death tax brings in $23 billion in annual revenue, 
but costs the private sector another $23 billion in compliance costs. 
Therefore, the total impact on the economy is a staggering $46 billion. 
When one calculates the amount of money spent on complying with the 
tax, the number of lost jobs resulting from businesses being sold, or 
the resources directed away from business expansion and into estate 
planning, it is no wonder that a grandswell has formed to eliminate 
this punitive tax that constitutes only 1.4 percent of all federal 
revenues.
  Congress has attempted to help ease the burden of the death tax by 
increasing the personal exemption--which now stands at $650,000--to 
adjust for the inflation of assets. Unfortunately, this will continue 
to be too little help as home values, the increasing popularity of 
defined contribution retirement plans, and the trend toward more small 
business entrepreneurship drives middle-income people above the 
exemption. If you calculated the personal exemption that existed under 
Franklin Roosevelt's administration in today's dollars, it comes out to 
$9 million.
  In particular, Congress has tried to help small businesses by 
creating an additional death tax exemption for family-owned businesses. 
Here too, however, is where good theory becomes impractical in the real 
world. The family-owned business exemption enacted as part of the 
Taxpayer Relief Act of 1997 creates 14 new definitions with which a 
business must comply before it is eligible for relief. Although a good 
idea at the time, this exemption has proven to be nothing more than a 
boondoggle for attorneys and estate planners who are hired by families 
trying to navigate their way through these eligibility hoops.
  The Death Tax Elimination Act (H.R. 8) is the right answer at the 
right time. The productivity of enterprising Americans and a 
Republican-led Congress intent on reducing wasteful spending has helped 
to produce the first budget surplus in a generation. What will be 
Congress's response to this surplus? Will it spend the money on dozens 
of government programs that could no doubt be created or expanded? Or, 
will it cobble together a complicated tax plan that aims to help 
everybody and, therefore, helps almost no one? We must provide the 
American people with fairness in our tax system so that individuals who 
save and invest for their children and grandchildren's future will no 
longer be punished.
  Restoring fairness to our tax system must center around two main 
principles: the non-Social Security surplus belongs to the American 
people and it ought to be returned to them; and we must preserve the 
foundations on which strong communities are built. I can think of no 
better idea that fulfills both these principles than repeal of the 
death tax. The ingredients to a successful family or business--savings, 
investment, and hard work--must be once again rewarded, not taxed.
  Mr. Speaker I commend the effort of Senator Hillman, Representative 
Young, and the Colorado General Assembly. They remind us that the 
impact of our decisions here will be surely felt in Colorado and 
everywhere in America. I hereby submit for the Record Colorado's Senate 
Joint Memorial 99-004.

                      Senate Joint Memorial 99-004

       Whereas, The Federal Unified Gift and Estate Tax, or 
     ``Death Tax'' generates a minimal amount of federal revenue, 
     especially considering the high cost of collection and 
     compliance and in fact has been shown to decrease federal 
     revenues from what they might otherwise have been; and
       Whereas, This federal Death Tax has been identified as 
     destructive to job opportunity and expansion, especially to 
     minority entrepreneurs and family farmers; and
       Whereas, This federal Death Tax causes severe hardship to 
     growing family businesses and family farming operations, 
     often to the point of partial or complete force liquidation; 
     and
       Whereas, Critical state and local leadership assets are 
     unnecessarily destroyed and forever lost to the future 
     detriment of their communities through relocation or 
     liquidation; and
       Whereas, Local and state schools, churches, and numerous 
     charitable organizations would greatly benefit from the 
     increased employment and continued family business leadership 
     that would result from the repeal of the federal Death Tax: 
     Now, therefore, be it
       Resolved by the Senate of the Sixty-second General Assembly 
     of the State of Colorado, the House of Representatives 
     concurring herein:
       That the Congress of the United States is hereby 
     memorialized to immediately repeal the Federal Unified Gift 
     and Estate Tax; and be it further
       Resolved, That copies of this Joint Memorial be sent to the 
     President of the United States, the Speaker of the United 
     States House of Representatives, the President of the United 
     States Senate, and each member of the Colorado congressional 
     delegation.

     

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