[Congressional Record Volume 146, Number 69 (Wednesday, June 7, 2000)]
[House]
[Pages H4025-H4031]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
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ELIMINATING THE ESTATE TAX
The SPEAKER pro tempore (Mr. Gary Miller of California). Under the
Speaker's announced policy of January 6, 1999, the gentleman from
Illinois (Mr. Crane) is recognized for 60 minutes as the designee of
the majority leader.
Mr. CRANE. Mr. Speaker, I rise today to address the tax that is one
of the most obscene, unfair, and immoral of all taxes. The estate tax,
or what is commonly referred to as the death tax, since it is generally
triggered only by one's removal from productive life, has outlived its
usefulness. Later this week, this body will be voting on legislation to
eliminate the death tax, and I think it is past time to bury the death
tax once and for all.
Mr. Speaker, I am submitting for the Record an article by William
Beach from the Heritage Foundation entitled ``Time to Eliminate the
Costly Death Tax.''
Time To Eliminate the Costly Death Tax
(Published by William W. Beach, the Heritage Foundation)
The U.S. House of Representatives is once again poised to
vote on repealing the federal death tax. In view of the
strong support that death tax repeal receives from the
general public, the House debate should be firmly grounded in
what an increasingly large percentage of voters already know:
Death taxes adversely affect many times the number of people
who pay the tax collector. The Death Tax Elimination Act
(H.R. 8), sponsored by Representatives Jennifer Dunn (R-WA)
and John Tanner (D-TN), is a response to this growing
understanding and offers the House its second opportunity in
an many years to eliminate this onerous tax.
Death taxes most often burden the very people that tax
policy is intended to help. For example:
Women and minorities are very often owners of small and
medium-sized businesses. After sacrificing daily to build
their businesses by reinvesting their profits, they soon
realize that the financial legacy of their hard work, which
they hoped to pass on to their children, instead will fall
victim to confiscatory taxation and liquidation.
Farmers often face losing their farms, but this is not so
much because of competition from wealthy agribusinesses or
capitalist ``robber barons.'' More often, it is because the
federal government heavily taxes the estates of people who
invested most of their earnings back into their farms and had
only meager liquid savings.
Workers suffer when they lose their jobs because many small
and medium-sized businesses are liquidated to pay death taxes
and because high capital costs depress the number of new
businesses that could offer them a job.
Low-income people are harmed--not only because the general
economy is weakened by the death tax's rapacious appetite for
family-owned businesses, but also because the death tax
discourages savings by encouraging consumption.
Specifically:
Death taxes hurt small businesses. Investing in a business
is one of the many ways to save for the future. For most
small firms, every available dollar goes into the business--
the dry cleaning firm, the restaurant, the trucking company--
to ensure that it sustains an income for the owners's family
and is an asset to pass on to children. Women with children
often find self-employment to be the only entry-level work
available. Minorities, many of whom wish to raise their
families in ethnic communities, understand well the virtues
and promises of self-employment. Yet the financial security
that family-owned and small businesses provide these
Americans is put at risk if the owner dies with a taxable
estate.
In an important 1995 study of how minority business owners
perceive the estate tax, Joseph Astrachan and Craig Aronoff,
economists of Kennesaw State University in Georgia, found
that:
Some 90 percent of the surveyed minority businesses know
they might be subject to the federal estate tax;
Although 67 percent of these businesses have taken steps
(gifts of stock, restructuring ownership, purchasing life
insurance, and buy-sell agreements) to shelter their assets
from estate taxes, over 50 percent of them indicate that they
would not have taken these steps had there been no estate
tax; and
Some 58 percent of all respondents in the survey anticipate
business failure or great difficulty maintaining the business
after their death.
Death taxes are more ``affordable'' as income rises.
Taxpayers who cannot pay tax-planning fees frequently lose
more of their estates to death taxes. Thus, what appears to
be a progressive tax contains a regressive dimension. Experts
on the death tax continually are struck by the number of
taxpayers who are insufficiently prepared to pay the death
tax and by the high correlation of these types of people with
those who have not had the benefit of high-priced legal and
accounting advice. Indeed, legal avoidance of high death tax
liabilities is closely related to the amount of fees
taxpayers are able to pay for expensive tax-planning advice.
Death taxes undermine savings and investment. Not only do
death taxes reduce potential employment opportunities and
undermine the promise that hard, honest labor will be
rewarded, but they also encourage consumption and undermine
savings. What can be said generally about income taxes can be
stated emphatically about death taxes: Accumulation of more
wealth will lead to more taxes, while consumption of income
will result in relatively lighter taxation. In other words,
it makes more tax-planning sense to buy vacations in Colorado
or a painting by Rubens than to invest in new production
equipment or expand a business.
Death taxes are costly to collect. The economic effects of
the disincentive to save and invest are striking, especially
in light of the relatively small amount of federal revenue
raised by death taxes. A 1996 Heritage Foundation analysis of
death taxes using the WEFA Group U.S. Macroeconomic Model and
the Washington University Macro Model, for example, found
that, if the estate tax had been repealed in 1996, then over
the next nine years: The U.S. economy would average as much
as $11 billion per year in extra output; an average of
145,000 additional new jobs could be created; personal income
could rise by an average of $8 billion per year above current
projections; and the extra tax revenue generated by extra
growth would more than compensate for the meager revenue
losses stemming from the repeal.
The death tax is not even a good value for the government.
Federal death taxes probably are the most expensive taxes to
pay and collect. Death taxes raise just slightly more than 1
percent of total federal revenues, but according to one 1994
analysis, total compliance costs (including economic
disincentives) amount to about 65 cents for every dollar
collected. Other studies, which subtract disincentives and
examine only direct outlays by taxpayers to comply with
estate tax law, put the compliance cost at about 31 cents per
dollar. This additional cost means that the $27.8 billion
collected in federal death taxes last year actually cost
taxpayers $36.4 billion.
Mr. CRANE. Mr. Speaker, I would now yield to our distinguished
colleague, the gentleman from Arizona (Mr. Hayworth), a member of the
Committee on Ways and Means.
Mr. HAYWORTH. Mr. Speaker, I thank my colleague, the gentleman from
Illinois (Mr. Crane), the distinguished chairman of the Subcommittee on
Trade of the Committee on Ways and Means here in the House of
Representatives.
Mr. Speaker, later this week we will come to this floor to vote on
putting at long last the death tax to death, and we will be offered a
clear choice. Some in this chamber will embrace the politics of envy,
but, Mr. Speaker, I believe a bipartisan majority will embrace the
principles of fairness, hope and opportunity, for that is what we seek.
As my good friend from Illinois just pointed out, there is no tax
more unfair than this death tax. Stop and think about it. Think back to
the very foundations of our Nation, to one of our founders, Benjamin
Franklin, who had a gifted and diverse career, who indeed won much
public acclaim and a fair amount of his fortune as a social commentator
in Poor Richard's Almanac when he observed, ``There are only two
certainties in life, death and taxes.'' But even Dr. Franklin, with all
his wisdom, with his ability to seemingly see into the future, not even
a person as impressive as Dr. Franklin do I believe would realize that
one day the constitutional republic that he helped to found would
literally tax its citizens upon the day of their death.
The rallying cry is simple, my colleagues. The American people
instinctively understand it. No taxation without respiration. And here
is why. This vast Federal Government, accumulating revenue in much the
same way as I, before I went on my diet, would go to a buffet line kind
of piling it up,
[[Page H4026]]
searching for it in every nook and cranny, this ravenous Washington
bureaucracy seeking revenue, when all is said and done, picks up
precisely 1 percent of its revenue through the death tax, and yet
three-quarters of that 1 percent is spent badgering widows and children
and survivors of those who embraced the American Dream, who built up
small businesses, who fed and clothed Americans on farms and ranches.
Indeed, my colleagues, perhaps nowhere is it more dramatic a dilemma
than on the family farm or on the family ranch across the width and
breadth of our great Nation. This is a classic dilemma. Those who have
the family farm could be accurately called cash poor and land rich.
When there is a death, it is quite simple, Uncle Sam comes to the
survivors and says, here is an expensive tax bill, pay it. How then is
it paid? Well, the family farm is sold.
And one of my friends who chooses to embrace the politics of envy,
who preceded me in this well, claimed there were no statistics to offer
on this. Well, I know that there are those who long for the soul of the
accountant in all of these transactions, but I do not want to besmirch
the profession of accountancy. I simply want to point out that
especially my colleagues from suburban and urban districts might be
compelled to realize that there is life outside the major metropolises;
that power does not come from a light switch; that milk does not come
from the corner market; that America's farmers provide these things,
and the death tax absolutely pummels rural communities and family farms
and ranches.
We feel that acutely in the Sixth Congressional District of Arizona,
a district in square mileage almost the size of the Commonwealth of
Pennsylvania, from the small hamlet of Franklin in Southern Greenlee
County, north to Four Corners, west to Flagstaff, and south again to
Florence, really all the way south to San Manuel, site of the largest
underground mine in North America. Hard working people who play by the
rules and a multitude of small towns are ravaged by this death tax.
Because those who have spent their time building businesses, who helped
provide for the farmers and ranchers, are forced to sell those
businesses.
Perhaps my colleagues have seen it in their communities. Perhaps
those in larger cities would see it if they could take off their
blinders and resist for a time the politics of envy. Perhaps they too
could realize that, yes, more often than not, when a family loses
control of a business, there is a reassessment and, yes, long-time
valued employees are let go. Under new management often means faithful
employees are out the door.
And even as we champion new economic opportunities, why add to
uncertainty? What crime have these families committed that would prompt
the Federal Government to say to them, ``Sell your business; pay Uncle
Sam.'' They have committed to crime. But under our curiously misguided
Tax Code, as it stands today, they have committed an offense in the
eyes of those who always embrace the radical redistribution of wealth.
Mr. Speaker, those folks worked hard and succeeded and they are being
punished for succeeding. And it is wrong and it has cost America too
many family farms, too many family ranches, and too many small
businesses.
No matter the platitudes of the left and those who preach the
politics of envy, it is common sense, Mr. Speaker. Across the width and
breadth of the Sixth Congressional District I have held many town
meetings. My colleagues who join me tonight will attest to the fact
that there is no greater thrill than meeting with constituents and
listening to what is on their minds. And how many times have I heard
the story of a family ranch being sold to satisfy the tax man.
Indeed, Mr. Speaker, we hear these stories even as we return to this
capitol, ofttimes referred to as the crossroads of America because we
meet so many people from so many other places. A gentleman stopped me
just last night, told me the story of his 83-year-old mother who, some
years ago, upon the death of his father, was told by the Washington
bureaucrats, ``You have a tax bill of over $800,000. We don't care how
you pay it, you just pay it.'' And, just like that, the family business
was gone, Mr. Speaker.
Now, some of my friends in accounting might say, oh, that lady had
the assets to sit down with a tax attorney or an accountant. Certainly
she could have provided some sort of means to hold on to the family
business. She is to blame for not doing so. No, Mr. Speaker. No, the
blame is not on that lady in her 80s, now forced to subsist on Social
Security. The fault lies in a Tax Code that punishes people for
succeeding, that deprives other Americans of jobs, that inhibits the
very free market principles and the notion of rewarding ambition and
success and prosperity upon which this country was built and upon which
this country can prosper. But we can change that this Friday when we
put this death tax to death.
I mentioned a second ago, Mr. Speaker, town hall meetings. Another
thrill we have, those of us who are honored to serve in the Congress of
the United States, comes on those occasions when we are able to appoint
young men and women to our military academies. I was in Winslow,
Arizona, where two young men who aspired to attend one of those
military academies received permission from their high school principal
to leave during the lunch hour and join us at city hall for a town hall
meeting. And there in Winslow, Arizona, the farmers, the ranchers, and
the small business people were lamenting this death tax. And one of
those young men, just really the epitome of all that is good in young
people wanting to serve their country, one of those young men stood
ramrod straight and said, ``Congressman, sir, do you mean to tell me
the Federal Government taxes you when you die?''
Now, initially, there was laughter among the older members of that
audience in that town hall meeting. But then, upon further reflection,
my constituents decided that really was not funny; that it epitomized
just what was so unfair, just what was so unjust, just what was so
unproductive about continuing to punish people for succeeding and
trying to pass on their businesses, their dreams, to their heirs.
Now, again, my colleagues, we have a choice. There will be those who
continue to propagate the fiction that we should rely on the politics
of envy, but a bipartisan majority will emerge this Friday saying we
embrace the policies of hope. And the first step we take to do that is
to put this unfair, unjust death tax to death.
Mr. Speaker, I yield back to my colleague from Illinois.
Mr. CRANE. Mr. Chairman, I congratulate our colleague for his
insightful observations on this immoral Tax Code that we are speaking
about tonight. And I now would like to yield to our distinguished
colleague, the gentleman from Montana (Mr. Hill).
Mr. HILL of Montana. Mr. Chairman, I thank the gentleman for yielding
to me tonight to join with him and others to talk about the repeal and
the elimination of the death tax.
As the gentleman knows, the strength of our Nation's economy rests in
its small businesses, small farms, and small ranches. That is where new
jobs are created. That is where the economic vitality of this country
is. I am proud of the fact that I represent, I think, the largest
constituency of small businesses, over 25,000 small businesses in my
district, over 40,000 farms and ranches.
One of the characteristics of every one of these businesses is that
the owners plow almost all the cash flow that they generate, almost all
the dollars they earn back into those enterprises and those businesses.
Early on, it is usually to pay off the debt that it takes in order to
get started in that business. Then, later on, they will use that money
to add to inventory or to add new equipment or machinery to expand the
business and to make it grow or to put new people to work.
Now, these family farmers and these family ranchers and these small
business owners usually make very little. In the case of the farmers
and ranchers, they will accumulate a thousand acres or so, perhaps, and
100 critters or so, but they have relatively little cash flow to show
for it. They often have little to show for it. Almost always they have
no savings account, no retirement account. Sometimes they will have an
old pickup truck or an old car or an old farm vehicle.
[[Page H4027]]
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As my colleague the gentleman from Arizona (Mr. Hayworth) said, these
people become asset rich and cash poor. But eventually for all of us
retirement comes, and it is at this point that these folks have a
really big problem. Because they have little in savings and little in
retirement, the only thing they can rely upon is the asset, the farm or
the ranch or the small business that they accumulated. So, in order to
retire, they usually have to sell this business or part of this
business to their kids or to other people.
Now, until the Republican Congress reduced the capital gains tax, if
we added the Federal tax and the State tax together, that owner of that
business had to give a third of whatever they got for that business in
taxes. But that was not the whole story. If they sold that business to
their kids, their kids would have to pay 40 percent income tax on those
payments, as well.
So, in order to transfer that family farmer business, if they sold it
to their kids, they would have to pay 70 to 80 percent taxes on that
transaction. Very few businesses could generate that kind of income.
We reduced the capital gains tax, and now it is down perhaps with
State and local tax to 25 percent. But if they sell part of this
business to retire to have some cash flow and leave the rest of it to
their kids, they are going to pay 60 percent tax on what they sell to
them and 56 percent tax on what they give to them.
Now, if they can possibly generate the money that is necessary to pay
those kinds of taxes, what it means is there are no dollars to
modernize that business to cause that business to grow and to expand;
and the result of that is that the lion's share of those businesses
fail because of the huge debt that they have to take on because of
estate tax.
Virtually every farm group in this country, virtually every advocate
for small business in this country will tell us that the greatest
threat to these family enterprises, farms and ranches and small
businesses, is the death tax. It is not low commodity prices. It is not
competition. It is this unfair tax. Farmers and ranchers just simply
cannot generate the cash flow they need to create a living for the
people that work and operate that farm or ranch or business and to pay
this tax.
So what ends up happening as an alternative? Well, what ends up
happening as an alternative is they will sell out to celebrities, for
example, in my State. Ranch after ranch are being bought by Hollywood
types or people who have earned their income from somewhere else who
buy their ranches or farms for recreation. The result of that is that
they are no longer productive farms and ranches, they no longer add to
the vitality of these small rural communities, and it is destroying the
economy of these rural communities.
Worse yet, many times the farmer or the rancher will subdivide the
land, divide it into 20- or 30- or 40-acre parcels, and sell one parcel
or two parcels a year to generate enough money to retire on. In the
end, they replace a ranch with a bunch of ranchettes. What happens then
is we lose all the wildlife habitat, we lose the open spaces and the
greenbelts that so many people advocate for in this Congress.
Now, the sad thing about all this is that the very wealthy do not pay
this tax. They use trusts, family trusts and charitable trusts, and all
kinds of mechanisms to avoid paying these taxes for generation after
generation. They avoid this tax.
But, my colleagues, 40 percent of the death taxes that are collected
by this Government are collected on estates of less than a million.
These are estates where there are family enterprises. They are the ones
that pay this tax.
It is not a fair tax. It is not good for our economy. It is not good
for our environment. It is eliminating green spaces and greenbelts. It
is destroying the economy of rural America. It is eliminating the
visual relief that so many of our city dwellers want to see when they
pass into the farm country. But passing this bill to repeal the death
tax, the Death Tax Elimination Act is essential for keeping agriculture
and families, for maintaining these family farms and these family
ranches, and to continue these family businesses.
I am proud to be a cosponsor of H.R. 8. On Friday I know we are going
to have a strong bipartisan vote. I am confident the Senate will pass
it and the President will sign it. I urge my colleagues to support the
bill.
Mr. CRANE. Mr. Speaker, I yield to our distinguished colleague, the
gentleman from Nebraska (Mr. Terry).
Mr. TERRY. Mr. Speaker, I rise in support of the efforts that we are
going to do for American families this week and eliminate the unfair
death tax.
Some of us like to talk about this issue in terms of numbers and
percentages and policy. And really what this does is it protects our
families. This is a family bill, but let us talk about it in the sense
of overall policy. And that is that, in my generation, we have done
well in either running the family business or even starting our own;
and our fathers, the greatest generation, have done well, as well.
So we have to figure out, in continuing prosperity and trying to
widen and deepen prosperity so it touches even more, if we are going to
continue policies of the Government usurping and taking money out of
the private sector and, therefore, stalling or risking future
prosperity for our children, then that is one policy we can take as
this next generation transfers their assets to the next generation.
Or we can do the right thing and allow that money to transfer to the
next generation, where it will be put back into the economy, where it
will be spent to expand, to recapitalize the family businesses. Or, God
forbid, they spend it on other things and continue to stimulate our
economy and ensure prosperity for our children when they graduate from
school that they will have opportunities for good jobs.
But we can talk about it in the policy sense and how it is the right
thing to do. But what I want to do is just talk about the impact on the
families in Nebraska, because I am here to fight for those families.
Because what this does, when we eliminate the death tax, what we are,
in essence, doing is protecting the culture, the history and the
heritage of families.
Yesterday in our office we had the Farm Wives Association. What was
their number one issue? It was elimination of the death tax. They want
to try to pass their family farm, many of which their grandfathers
staked out, they want to pass it to their sons and their daughters. But
they cannot.
The average farm size in Nebraska is about 840 acres. That is well
over the limit before we even get to the machinery and the value that
the IRS would place on that business. But it is a cash poor business.
They have no choice but to sell that farm instead of passing it to the
next generation. They have to sell it to pay their IRS tax bills. They
have to. They have no other choice.
So, as we are talking about protecting the history and the culture of
our small family farmer, it is our IRS policy that is forcing the
consolidation. It is these families that are selling out to the Ted
Turners who own tens of thousands of acres in Nebraska.
But let us talk about in Omaha, Nebraska, where I was born and
raised. Let us talk about the Omaha Printing Company, a third-
generation company. It is a small business. They employ about 30 or 40
folks. Yet, they have several really impressive machines when I took
the tour of it, and each of those machines run well over $500,000 to
$600,000. They have three of them right there that is putting them to
the limit before we get to all the other assets of that business and
the valuation.
The father that is currently operating that business is going to have
a choice to make. Sure, they have paid the lawyers and the accountants
to try to comply with this tax code and trying to pass it to the next
generation, but they are realizing that they are probably going to have
to spend about 40 percent to 50 percent of the assets of that business
to try and keep it in the family.
What about in south Omaha, the great and colorful cultural area of
our town, with the Jocobo's grocery store and tortilla plant. They have
got a couple of taco shell and tortilla shell machines in the back,
just a couple of them. But the value of their inventory and the value
of the machines itself puts them over before we get to the valuation.
And Carlos, who is in his early 40s and has a young family that he
would like to pass the grocery store on to, he may not have that
opportunity.
[[Page H4028]]
Mr. Jocobo emigrated from Mexico several years ago, 40 years ago, and
established a small south Omaha business. It is really the center and
the hub of this colorful Hispanic community that is so vibrant in south
Omaha.
I just hope that we do the right thing, Mr. Speaker, for that
Hispanic owned grocery store and small business in a colorful part of
my district. We have an historic opportunity to protect, to work, and
fight for families and their history and their culture. Let us not miss
this opportunity.
Mr. CRANE. I now yield, Mr. Speaker, to our distinguished colleague
from California (Mr. Bilbray). I was going to say Australia.
Mr. BILBRAY. Mr. Speaker, I thank the gentleman very much for
yielding.
For the Record, my mother is from Australia, but she is an American
who is from Australia.
Mr. Speaker, I just wanted to sort of echo the issue that when we
talk about the death tax, I think too often we talk about the families
that have to give up their businesses and give up their homes and their
farms and the way that it breaks up the hard work and the sweat of
parents, their ability to pass it on to their children, but I think
that we do not talk about the bigger picture.
I want to articulate something. The fight against the death tax
should not be a fight for the taxpayer. It should not even be for the
small farmer or the small business owner. The fight against the death
tax should be a fight for a civilized, decent society, and that is it.
Now, my colleagues may say how can I tie the death tax to the concept
of decency? Well, Mr. Speaker, I always try to think about what will
history say about us as a society.
There is this movie out ``The Gladiator'' about this great
civilization called Rome. But how can they be a great civilization when
they had the kind of blood letting they had? And history has damned the
Romans for that.
What I worry about is what will history say of the greatest nation in
the history of the world, the United States of America? What will they
say about us a thousand years from now? And will they say about us, oh,
they were a great nation, but they taxed their dead? How are we going
to justify ourselves to history?
Now, there is a bigger picture here that I think we have got to
address, and that is the fact that this tax does not just impact
individuals and businesses but it is impacting us as a society.
I think those of us on the Republican and the Democratic side will
say one of the biggest concerns we have is watching multinational
corporations come into the United States and absorb and digest and
consume small entrepreneurial family businesses such as farms and
businesses. And we will hear those on both sides of the aisle talk
about how multinational corporations are getting so big and they are
basically getting the monopoly because the little guy is being gobbled
up. And it is right.
The true defender of the consumer is not government. The true enemy
of big business is not big government. It is little business that
competes and gives the consumer an alternative than the big business
corporations and the multinational corporations that we hear our
liberal friends always yelling about. But our tax laws, my colleagues,
are subsidizing and encouraging and at many times mandating the selling
out of small entrepreneurial businesses to the multinational
corporations.
I will give my colleagues one example. Roll Construction in San Diego
is a family-built construction business and they have come to the
conclusion that when mom dies, the only way for them to be able to pay
the death tax is to sell out to a major multinational corporation.
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This is what it really comes down to. Are we for the little guy? Are
we truly for the taxpayer? Are we truly for the American? Or are we so
hell-bent to get our pound of flesh that we are willing to not only tax
the dead, sell the farm, sell the business, but also subsidize the big
corporate interests? That is something that we do not hear a lot of
talk about here. I think that we need to talk about it. Because I think
that we have got to understand that this will not only impact and help
the corporate but when the consumer is looking for competition, when
the consumer needs the break, the consumer will not have the little
entrepreneurial business to be able to beat the big guy because he is
not going to be around because the United States government has taxed
them into nonexistence. And so I think that when we talk about the
death tax, I want to ask our colleagues on both sides of the aisle,
think about what you really care about. And if you are so hell-bent to
try to get the rich guy, remember what happened in 1898 when this
government said we are going to get the rich guy by taxing the rich
guy's phones because everyone knows that the little guy and the working
class does not have phones. History has proved this year, we realized
what a huge mistake that politics of envy and of hate generate in the
tax code. The working class got nailed the worst of anybody
proportionately.
Remember in the early 1990s when they said we are going to tax the
rich and get their boats because that is a luxury by the rich. Who got
hurt? Who got hurt was the working class that were building those
boats. They were out of work. The business left the country. I think we
all remember the concept of the income tax was to really tax those who
made about $800,000 in today's dollars. It was only going to be 1
percent. Who would care? We are only taxing the rich. I think every
working-class family today now realizes what goes around comes around.
Mr. Speaker, I just think that we have got to say if we believe in
capitalism, if we believe in a free economy, if we believe in
government not subsidizing major world corporations, if we believe in
the fact that the family unit has the right to serve a community as a
family unit, as a business and a farm, then the death tax has to go.
I will close with one last example. There is a Latino family in my
district whose father immigrated here back in the 1950s, who has raised
a family and the sisters and the brothers and the mother and the father
and the uncles work in that print shop. They have grown their business
in printing. The fact is, though, they came to me and said, ``If
anything happens to mom and dad, we have to sell out.'' Who will they
sell out to? To the people who have the money to buy them out, the big
corporate interests that do not want to see those small entrepreneurial
immigrants competing with them. I would just ask us to consider that
and let us not talk about and cry about the fact that big companies are
getting bigger unless you are willing to stand up and say, okay, there
are some things we cannot control in the private sector but this is one
we can. Government, for God sakes, quit subsidizing the major national
corporations and start it here first by not forcing small family
businesses to sell out to them. We hear a lot of talk about that, about
not subsidizing corporate business, on both sides of the aisle. That
should be right. But the death tax is the major force of making them
sell out. You can see every study in the world what breaks the back of
the family business.
So I ask my colleagues a thousand years from now, what will
historians say about this Congress and this society and this Nation?
Will they say that we taxed the dead and taxed their citizens to death
or will they say they recognized the wrong, they recognized the
injustice, they recognized the immorality of their tax code and they
did the right thing and killed the death tax.
Mr. CRANE. I commend my distinguished colleague from California.
Mr. Speaker, I yield to the distinguished gentleman from Tennessee
(Mr. Duncan).
Mr. DUNCAN. I want to first of all to say that I rise in very strong
support of this legislation to eliminate the death taxes in this
country. This is something that I have cosponsored for several years. I
want to thank the gentleman from Illinois for yielding. First of all I
want to commend him for putting together this very important special
order and for leading the charge in this battle as he has on so many
other things over the years in this Congress.
I first got to know the gentleman from Illinois (Mr. Crane) when he
came to speak to a very small group of conservative students at the
University of Tennessee in 1966. Then I think it was about 1972, I had
him come
[[Page H4029]]
speak to the George Washington University Law School to a packed
audience. I think he put those students into shock because with the
lack of true academic freedom that we have on the college campuses in
this country, many of those students at George Washington Law School
had never really heard a truly conservative speaker such as the
gentleman from Illinois. I am proud to call him a friend. I think he is
one of the finest men that I have ever known in my life.
Mr. Speaker, let me just say that today, and many people do not
realize this, the average person pays almost 40 percent of his or her
income in taxes of all types, State, Federal and local, sales,
property, income, gas, excise, Social Security, all of the other types
of taxes, and the estate or death taxes. Then it is estimated that
consumers pay another 10 percent in regulatory costs that are passed on
to the consumer in the form of higher prices. A Member of the other
body our good friend Senator Thompson from Tennessee, I remember a
couple of years ago he had ads on television which said today one
spouse works to support the family while the other spouse has to work
to support the government. There are some of us in this Congress, in
fact many of us in this Congress and I think an even greater majority
across the country that think that basically half of the average
family's income going to support government is not only enough, it is
far, far too much. This legislation to eliminate the death tax I am
told will put over $20 billion back into the pockets of average
Americans. It probably, as the gentleman from California (Mr. Bilbray)
has just pointed out, is the most important single thing that we can do
to help small business and to help small family farmers in this
country.
It has been a regular thing since World War II to have White House
conferences on small business. In almost every one of those
conferences, the number one or number two issue for these small
businesses has been the effort to try to eliminate the estate or death
taxes. It has been I think one of the very top issues for the American
Farm Federation and other farm organizations. It is something that is
long, long overdue. The gentleman from Pennsylvania (Mr. Peterson) told
me that it takes $12 billion just to collect this tax. And so the
government really does not make that much but it takes a lot of money
away from families and small businesses in this country. As the
gentleman from California did such a great job just a few minutes ago
pointing out, this is probably the best thing that we could do to help
small business, if we all decry the fact and worry and show concern
about the fact that every industry seems to be going to the big giants,
the big keep getting bigger and the small keep going by the wayside
because they cannot survive, they have to merge and they have to keep
growing and get bigger and bigger to survive or merge or sell out. And
so if somebody wants to really help the big giants in almost every
industry and if you want to help, as the gentleman from California
said, the big multinational corporations, probably one of the best
things you could do is support keeping these death taxes in effect. But
if you want to see family farms survive and if you want to see small
businesses survive, then you will support this legislation to eliminate
these death taxes that I think we will have on the floor on Friday.
I remember several years ago, quite a few years ago I went with a
friend to see the University of Tennessee play Georgia in a football
game. We were in Atlanta and had breakfast with these two accountants
who specialized in buying businesses. They told us that most of the
businesses they bought, they bought from second-generation owners
because they said it was hard to buy from a first-generation owner
because the business was usually that person's dream. But they said
that if they ever found a business that was in a third-generation
ownership, they thought they had hit the jackpot. But they told us, do
you realize how rare it is, how extremely unusual it is that a business
makes it into the third generation of ownership? And I think one of the
main reasons that so few businesses make it into the third generation
of ownership is because of these death or estate taxes that have forced
so many families to sell out to bigger businesses or bigger
corporations.
We started several years ago when control of this Congress changed
trying to bring Federal spending and the Federal Government under a
little bit of control. The first 6 years I was in this Congress, we
were just routinely voting 12, 15, 18 percent increases for every
department and agency out there. Mr. Speaker, to show how bad it had
gotten, Alice Rivlin who was the President's head of the OMB and is now
in the Federal Reserve put out a memo that said if we did not make some
changes, this was a few months after President Clinton came in, we were
going to have yearly deficits or yearly losses of over $1 trillion a
year by the year 2010 and between 4 and $5 trillion a year by the year
2030. If we had sat around and allowed that to happen, I think
everybody knew the whole economy would crash. Since the control of the
Congress changed, we at least have brought Federal spending under some
type of control so it is basically just rising at the rate of
inflation. But we have not cut nearly as much, and we really have not
cut at all like some people think. About 3 months ago, Robert Samuelson
in Newsweek wrote a column, and he is not considered to be a
conservative columnist at all, he wrote a column and he said,
``Government is slowly getting bigger because paradoxically we think it
is getting smaller.'' That is what Robert Samuelson wrote in Newsweek
about 3 months ago. ``Government is slowly getting bigger because
paradoxically we think it is getting smaller.'' Government keeps
getting bigger and taking more and more from the people of this country
and there are many of us who think that the average person in this
country knows better how to spend his or her own money than Federal
bureaucrats in Washington know how to spend it for them. That is the
philosophy behind this legislation to eliminate the death taxes. There
is very little legislation that can do more to help the economy and to
help small business and small family farms and to give a little money
back to the people of this country so that they can use it on their own
families rather than have the Federal Government just continue to waste
it and waste it and waste it. I rise in strong support of this
legislation.
Mr. CRANE. I thank the gentleman for his kind remarks. I would remind
colleagues I had the distinct privilege of serving with his father who
was also our chairman of the Committee on Ways and Means. We are all
honored that the gentleman has had the opportunity to succeed his
father and represent the good folks down in Tennessee.
Mr. Speaker, I yield to the distinguished gentleman from Tennessee
(Mr. Wamp).
Mr. WAMP. I thank the gentleman for yielding very much. I did not
intend to come to the floor and speak tonight but I was watching this
discussion on television and decided to come and share just a couple of
points I think that are important. About 3 years ago, we passed the
Balanced Budget Act of 1997. It had a lot of good things in it and a
few bad things in it. As we oftentimes have to do, you have to weigh
the good versus the bad and make a judgment call. I think a lot of good
came out of that. But very few people out there realize that at the
very last minute of the negotiations of the Balanced Budget Act of
1997, which really have set in place the framework of the balanced
budget and the spending caps that have kept the budget balanced and I
think stimulated the markets and given investors confidence and helped
this economy thrive over these last 3 years, but at the very last
minute, one of the biggest disappointments that I have had in the last
6 years that I have been here was that they changed their plans with
respect to the elimination of the death tax or the lifting of the
exemption of the death tax, because the negotiations centered around
doubling the exemption back in 1997 for the estate tax, the death tax
so that when people die, a certain percentage of what they have is not
taxable.
{time} 2130
And it was a great disappointment at the 11th hour back in 1997 when,
instead of doubling the exemption for the death tax, they came back and
put just an annual index on it. So it gradually goes up.
[[Page H4030]]
That was a big disappointment, because back home in Tennessee, where
I live and spend time with my family and the people that I represent,
there are a lot of stories about regular people, hard-working small
business people that are affected by this unfair tax at death, where
the taxman comes, when a family member dies, and asks for the money
very soon after death, within 6 months, and you have to pay up. You
have to find the money to pay up.
In Washington, we went through an appropriation's markup today. There
is a lot of rhetoric from the other side of the aisle about this whole
tax proposal to eliminate the death tax over time and to raise the
exemptions and to give death tax relief to small business people and
individuals out there.
There is a lot of talk that this is a tax plan for the top \1/10\ of
1 percent of the wealthiest Americans. Let me tell you what my
experience is: This is all about doing what is fair for people in this
country. Some of them, yeah, they were in business. Some of them are
family farmers, but a lot of them are just grassroots small business
people that find themselves in a position that they have to pay the
taxman when maybe their parent passes away.
I just want to tell a story, without naming names, about a young man,
a young family in my Sunday School class at Red Bank Baptist in
Chattanooga, Tennessee. This young man is in business with his father.
He lost his mother just a few years ago. When his mother passed away,
he analyzed the situation being in business with his father, because it
really hit him like a ton of bricks that he needed to have some tax
professionals look at his situation. He found that if something were to
happen to his father, he would owe the taxman large sums of money and,
effectively, be forced to sell his business.
Now, this is not some kind of big business. Let me tell you. This is
small business. I am talking about old buildings. I am talking about a
lot of maintenance. I am talking about very few employees, less than
10. I am talking about a very small family business, yet, over time,
they built up enough momentum and enough assets that at death this
individual, if his father passed on, would have an enormous and
immediate tax bite.
Frankly, all that money that has been generated for this family
business over this generation has already been taxed, yet, the
government in this country at a time where we have a budget surplus,
where we do have a good economy and consumer confidence, this is the
time where WE say what are the most unfair taxes and let us eliminate
them; what are the taxes that will give the most economic stimulus, and
let us cut them.
This is a time where you can return some of the money to the people
that pull the wagon in this country, and that is what I found. My
friend needs this tax relief. He is not wealthy. He needs this tax
relief so if something happens to his father, he is not forced to sell
that business.
We have to have some generational equity in this country again, where
families work and invest and hand down and pass down the fruits of
their labor. We cannot have let us take it all out, we have to have,
you know, a culture that says let us invest and save and pass down.
That is the American dream. This legislation will shore up that
American dream.
In closing, let me say this, our free enterprise system is what
people in Eastern Europe and the Soviet Union were willing to risk
their lives to have. We run all over it. We take it for granted. We
mistreat it. We overtax it. We overregulate it. We overlitigate it. It
is the goose that lays the golden egg of American opportunity, and that
is our free enterprise system.
It is precious. This piece of legislation is the next great example
of the difference between the two approaches of whether we hold up
profit as a good word and the free enterprise system as really the
anchor of our society. The free enterprise system; yes, you can go into
business in this country; yes, you can make a profit. Greed is a bad
word. Profit is a good word.
Let us quit treating profit like it is a bad word. The free
enterprise system is what the other folks want to have. Let us treat it
fairly. Let us give it what it needs. Let us treat these small business
people with dignity, and let us lift this estate tax exemption as much
as we can. I would say over time, let us just wipe it out, but let us
take this next first step on Friday, and let us not let the demagogues
win.
This is not about tax breaks for the wealthy. This is about working
people that pay the taxes that pull the wagon, and we have to give them
some help and get the government off their backs.
Mr. Speaker, I thank the gentleman from Illinois (Mr. Crane) for
everything he has done over the years in this institution in the
Committee on Ways and Means. I appreciate what he has done for the free
enterprise system in this country. I wish him all the best. I am proud
of him for what he has done in his personal life. It is outstanding. I
appreciate the opportunity.
Mr. CRANE. Mr. Speaker, I thank the gentleman from Tennessee (Mr.
Wamp). I deeply appreciate his comments.
Mr. Speaker, I yield to our distinguished colleague, the gentleman
from Pennsylvania (Mr. Peterson).
Mr. PETERSON of Pennsylvania. Mr. Speaker, I thank the gentleman from
Illinois (Mr. Crane), the chairman, for putting this together tonight
and for bringing this issue to this Congress.
I guess a year or two ago, we heard the demagogues say that the
capital gains tax did not need to be cut; that it was going to cost
necessary revenues for this country to run off. It was going to cause
all kinds of economic chaos.
What happened when we cut the capital gains tax from 28 percent to 20
percent? It released capital. People began to sell properties and sell
stocks and sell things that they paid capital gains on, because that 28
percent tax had been reduced to 20 percent. They were willing to pay 20
percent where they were not willing to pay 28 percent.
What happened the first year? $38 billion of additional revenue came
into the Federal Government. It did not cost to cut that tax. I think
if we would have cut it to 15 percent last year as we talked, we
probably would have increased revenues again. We certainly would have
helped the growth of business.
Today and this week we are going to be dealing with the death tax,
the estate tax. We are going to hear the same arguments, we heard it
tonight, that it is about billionaires. It is not about billionaires.
It is about small business, small farmers, small sawmills, small
manufacturers, supermarket operators, locally-owned ones, locally-owned
hardware stores, the people that are in our communities that serve on
our borough councils, that serve on our local advisory boards, that
serve in the recreations commission that give back to their community.
It is not corporate America. It is the local business people. We
heard that it was about billionaires. Well, here are the numbers. 53
percent are 1 million or less, 39 percent are 1 million to 2\1/2\
million, 7 percent from 2\1/2\ million to 5 million, and 3.7 percent of
the cases are over 5 million.
You do not have to have a very big business today to have a couple
million dollar business. You can have 4 machines in a building, a
couple of trucks and some other office equipment, and you have a
several million dollar business. Let us say it is a family business and
the children are involved. Oftentimes, the children helped grow the
business.
It was a partnership between fathers and sons and mothers and
daughters, and as they made this business grow and the parents passed
on, the only way they could protect themselves was to spend a lot of
capital and buy insurance to pay the taxes, and some do that. It takes
money that they might need to buy another machine to expand to grow the
business.
This tax is not about large corporations. The public-held
corporations do not pay this tax. And where is the future of America?
The future of America is small business. The strength and growth of our
economy has been new businesses. The record of new businesses is not
always real good. Indirectly small business owners, the major producers
of most new jobs are forced to hire fewer workers than they desire
because of the high capital costs associated with death taxes.
Likewise, with death of a small business owner, many employees lose
their jobs when relatives of the deceased
[[Page H4031]]
owners are forced to liquidate the business to pay the death taxes.
This occurrence is not rare; 70 percent of all businesses never make it
past the first generation. 87 percent do not make it to the third
generation, and only 1 percent make it to the fourth generation. One of
the major reasons for this phenomenon appears to be the death tax.
A recent survey conducted by Prince & Associates demonstrated that 90
percent of successors to family-owned businesses that were forced to
liquidate within 3 years of the original owner's death claiming that
paying death taxes was one of the major culprits of the company's
demise.
Now, when you stop and look at our individual communities, the
backbone of our communities are not the national corporations, though
we are fortunate if we have a plant there, or if they have businesses
there, but the real strength of our communities are the local
entrepreneurs, the local businesses, the local sawmill, the local
hardware store, people who have lived their life there, who are vitally
a part of that community.
Yes, one third of small business owners today will have to sell or
liquidate part of their business to pay estate taxes. Half of those who
liquidate to pay death taxes will have to eliminate 30 or more jobs. So
if we want job growth, this is a tax that prohibits businesses from
continuing the growth cycle they are on. Mr. Speaker, maybe they were a
business that had two restaurants and were ready to go to number three,
and one of the parents die, and suddenly they have to sell one of the
restaurants to pay the death taxes.
They stop the growth cycle whenever they were going to go to
restaurant number 4 or restaurant number 5, or they were going to add
machine number 5 or machine number 6 that would have employed three
more people, one more for each shift, and more people for the office
and more people to truck the goods in and out.
It is a tax that makes no economic sense. It is also one that is not
easy to collect. It costs considerable. It is 65 percent of the tax, 65
percent of the tax that is collected is costs of collection. That is
not a very efficient tax. And when you want less of something, tax it
heavily.
When you tax something 37 percent to 55 percent, you are going to
have a whole lot less of it, and that is what we are doing to
successful businesses in this country. We are taxing them 37 percent to
55 percent when they want to transfer that business from the parents at
their death to the children. There is nothing right about that.
A study by George Mason University Professor Richard Wagner showed
that eliminating the death tax would have a substantial impact on
lowering the costs of capital and thus increase the health of the
economy. Wagner found that within 8 years of eliminating the death tax,
the gross domestic product would be $80 billion larger than expected,
resulting in the creation of 250,000 additional jobs and $640 billion
larger capital stock.
Ladies and gentlemen, cutting this tax will not lose revenue for this
country. In the long run, it will be a stimulus to our country. It will
help the small businesses who are competing with the large corporate
entities of this world. The future lies with the Bill Gates' of the
future who may start in their garage, who may start in a little
warehouse someplace in the corner of it and start to grow a new
business, providing new service, with a new concept, a new idea, and
when suddenly that generation passes on, the next generation can
continue.
Yes, even liberals support this. A University of Southern California
Law Professor Edward McCaffrey, a self-described liberal, stated in
testimony before the Senate Committee on Finance recently, the death
tax discourages behavior that a liberal democratic society ought to
like. It discourages work. It discourages savings. It discourages
bequests, and it encourages behavior that such a society ought to
suspect, the large scale consumption, leisure, giving of the very rich.
It is a tax on working and savings without consumption. It is a tax on
thrift, on long-term savings.
There is no reason, even a liberal populace supports it. The current
gift and estate tax does not work. It is a deep tension with liberal
ideals and lacks strong popular or political support; that is from a
liberal.
Ladies and gentlemen, it is time for us to do away with the death
tax. It will have a positive economic impact on the future growth of
America. It will grow new jobs. It will inspire our economy to grow,
and it is time we eliminate it.
{time} 2145
Mr. CRANE. Mr. Speaker, I thank my distinguished colleague for his
remarks. In conclusion, I would simply like to pay tribute to our
colleagues, the gentlewoman from Washington (Ms. Dunn) and the
gentleman from Tennessee (Mr. Tanner) who are cosponsors of H.R. 8. It
has had bipartisan cosponsorship from the outset, and I look forward to
good, strong bipartisan support on Friday when we finally eliminate
this obscene component of our Tax Code.
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