[Congressional Record Volume 147, Number 7 (Monday, January 22, 2001)]
[Senate]
[Pages S343-S345]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LUGAR:
  S. 82. A bill to repeal the Federal estate and gift taxes and the tax 
on generation-skipping transfers; to the Commitee on Finance.
  S. 83. A bill to phase-out and repeal the Federal estate and gift 
taxes and the tax on generation-skipping transfers; to the Committee on 
Finance.
  S. 84. A bill to increase the unified estate and gift taxes and the 
tax credit to exempt small businesses and farmers from estate taxes; to 
the Committee on Finance
  S. 85. A bill to amend the Internal Revenue Code of 1986 to increase 
the gift tax exclusion to $25,000; to the Committee on Finance.


                              Estate Taxes

  Mr. LUGAR. Mr. President, I am pleased to introduce a series of bills 
intended to address the burden that estate taxes place on our economy. 
The estate tax hinders entrepreneurial activity and job creation in 
many economic sectors.
  As Chairman of the Senate Agriculture Committee, I have held hearings 
on the impact of the estate tax on farmers, ranchers, and rural 
communities. The effects of inheritance taxes are far reaching in the 
agricultural community. Citing personal experiences, witnesses 
described how the estate tax discourages savings, capital investment, 
and job formation.
  One such story came from a Hoosier, Mr. Woody Barton. He is a fifth 
generation tree farmer living in the house his great grandparents built 
in 1885. I visited his 300 acres of forested property recently and can 
attest to their beauty. Typical of many farmers, Mr. Barton is over 65 
years old and wants to leave this legacy to his four children. But he 
fears that the estate tax may cause his children to strip the timber 
and then sell the land in order to pay the estate tax bill. His 
grandmother logged a portion of the land in 1939 to pay the debts that 
came from the death of her husband. In essence, each generation must 
buy back the hard work and dedication of their ancestors from the 
federal government. Mr. Barton believes, and I agree, that the actions 
of Congress have more impact on the outcome of his family's land than 
his own planning and investment. This should not be the case.
  The estate tax falls disproportionately on our agricultural 
producers. Ninety-five percent of farms and ranch operations are sold 
proprietorships or family partnerships, subjecting a vast majority of 
these businesses to the threat of inheritance taxes. According to USDA 
figures farmers are six times more likely to face inheritance taxes 
than other Americans. And commercial farm estates--those core farms 
that produce 85 percent of our nation's agricultural products-are 
fifteen times more likely to pay inheritance taxes than other 
individuals.
  The threat of estate taxes to family farms will become even more 
prevalent if nothing is done. With the average farmer approaching 60 
years of age, farm families throughout the country are about to 
confront the burden of estate taxes as they prepare to pass their farm 
onto the next generation. Recently, the USDA estimated that between 
1992 and 2002, more than 500,000 farmers will have retired. Demographic 
studies indicate that a quarter of all farmers could confront the 
inheritance tax during the next 20 years.
  In light of this problem, today I offer several bills to provide 
relief to those impacted by the estate tax. This is the third 
consecutive Congress that I have offered this series of bills on the 
first day of bill introduction. I am optimistic that this will be the 
Congress that will finally repeal the estate tax.
  My first bill would repeal the estate and gift taxes outright. My 
second bill would phase out the estate tax over five years by gradually 
raising the unified credit each year until the tax is repealed after 
the fifth year. My third bill would immediately raise the effective 
unified credit to $5 million. My last bill would raise the gift tax 
exemption from $10,000 to $25,000.
  I believe that the best option is a simple repeal of the estate tax. 
However, even if the estate tax is not repealed, the unified credit 
must be raised significantly. Despite our most recent success in 
raising the exemption level, inflation has caused a growing percentage 
of estates to be subjected to the estate tax. My second bill is 
intended to highlight this point and provide a gradual path to repeal. 
My third bill focuses on relieving the estate tax burden that falls 
disproportionately on farmers and small business owners. By raising the 
exemption amount to $5 million, 96 percent of estates with farm assets 
and 90 percent of estates with non-corporate business assets would not 
have to pay estate taxes, according to the IRS. The final bill raising 
the gift tax exemption from $10,000 to $25,000 would provide Americans 
with an additional tool for passing productive assets to the next 
generation. This level has not been adjusted since 1982.
  Despite its modest beginnings in 1916, the estate tax has mushroomed 
into an exorbitant tax on death that discourages savings, economic 
growth, and job formation by blocking the accumulation of 
entrepreneurial capital and by breaking up family businesses and farms. 
With the highest marginal rate at 55 percent, more than half of an 
estate can go directly to the government. By the time the inheritance 
tax is levied on families, their assets have already been taxed at 
least once. This form of double taxation violates perceptions of 
fairness in our tax system.
  If we are sincere about boosting economic growth, we must consider 
what effect the estate tax has on a business owner deciding whether to 
invest in new capital goods or hire a new employee. The Heritage 
Foundation estimates that repealing the estate tax would annually boost 
our economic output by $11 billion, create 145,000 new jobs and raise 
personal income by $8 billion. These figures underscore the current 
weight of this tax on our economy.
  One might expect that for all the economic disincentives caused by 
the estate tax, it must at least provide a sizable contribution to the 
U.S. Treasury. But in reality, the estate tax only accounts for about 1 
percent of federal taxes. It cannot be justified as an indispensable 
revenue raiser. Given the blow delivered to job formation and economic 
growth, the estate tax may even cost the Treasury money. Our nation's 
ability to crease new jobs, new opportunities, and new wealth is 
damaged as a result of our insistence on collecting a tax that earns 
less than 1 percent of our revenue.
  But this tax affects more than just the national economy. It affects 
how we as a nation think about community, family, and work. Small 
businesses and farms represent much more than assets. They represent 
years of toil and entrepreneurial risk taking. They also represent the 
hopes that families have for their children. Part of the American Dream 
has always been to build up a business, farm, or ranch so that economic 
opportunities and a way of life can be passed on to one's children and 
grandchildren.
  I know first-hand about the dangers of this tax to agriculture. My 
father died when I was 24, leaving his 604-acre farm in Marion County, 
Indiana, to his family. I helped manage the farm, which had built up 
considerable debts during my father's illness. Fortunately, after a 
number of years, we were successful in working out the financial 
problems and repaying the money. We were lucky; that farm remains in 
our family. But many of today's farmers and small business owners are 
not so fortunate. Only about 30 percent of businesses are transferred 
from parent to child, and only about 12 percent of businesses make it 
to a grandchild.
  Mr. President, I was delighted that during the last Congress we were 
able to pass the Death Tax Elimination Act. Despite its ultimate veto, 
this legislative step was an important one and will hopefully carry 
over momentum to this congress. As we take up this issue again in the 
coming months, the bills that I have introduced will provide 
policymakers with a range of options as they seek to mitigate the 
burdens of the estate tax. Doing so will lead to expanded investment 
incentives and job creation and will reinvigorate an important part of 
the American Dream. I am hopeful that Senators will join me in the 
effort to free small businesses, family farms, and our economy from 
this counterproductive tax. I ask unanimous consent that my four bills 
be printed in the Record.

[[Page S344]]

  There being no objection, the bills were ordered to be printed in the 
Record, as follows:

                                 S. 82

       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 Tax Repeal 
     Act of 2001''.

     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 and 
     eliminate double taxation.
       (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) Abolishing the estate tax would restore a measure of 
     fairness to the Federal tax system. Families should be able 
     to pass on the fruits of labor to the next generation without 
     realizing a taxable event.
       (7) Abolishing the estate 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 this property to estate taxes upon the 
     death of the owner. Due to the capital intensive nature of 
     farming and its low return on investment, farmers are 15 
     times more likely to be subject to estate taxes than other 
     Americans.

     SEC. 3. REPEAL OF FEDERAL TRANSFER TAXES.

       (a) In General.--Subtitle B of the Internal Revenue Code of 
     1986 is repealed.
       (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.
       (c) Technical and Conforming Changes.--The Secretary of the 
     Treasury or the Secretary's delegate shall, as soon as 
     practicable but in any event not later than 90 days after the 
     date of the enactment of this Act, submit to the Committee on 
     Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate a draft of any technical 
     and conforming changes in the Internal Revenue Code of 1986 
     which are necessary to reflect throughout such Code the 
     changes in the substantive provisions of law made by this 
     Act.
                                  ____


                                 S. 83

       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 Tax Phase-
     Out Act of 2001''.

     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) Repealing the estate and gift tax would contribute to 
     the goals of expanding savings and investment, boosting 
     entrepreneurial activity, and expanding economic growth.
       (5) Abolishing the estate tax would restore a measure of 
     fairness to the Federal tax system. Families should be able 
     to pass on the fruits of labor to the next generation without 
     realizing a taxable event.
       (6) Abolishing the estate 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 this property to estate taxes upon the 
     death of the owner. Due to the capital intensive nature of 
     farming and its low return on investment, farmers are 15 
     times more likely to be subject to estate taxes than other 
     Americans.

     SEC. 3. PHASE-OUT OF ESTATE AND GIFT TAXES THROUGH INCREASE 
                   IN UNIFIED ESTATE AND GIFT TAX CREDIT.

       (a) In General.--The table in section 2010(c) of the 
     Internal Revenue Code (relating to applicable credit amount) 
     is amended to read as follows:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002..................................................$1,000,000 
      2003..................................................$1,500,000 
      2004..................................................$2,000,000 
      2005..................................................$2,500,000 
      2006...............................................$5,000,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.

     SEC. 4. REPEAL OF FEDERAL TRANSFER TAXES.

       (a) In General.--Subtitle B of the Internal Revenue Code of 
     1986 is repealed.
       (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 December 31, 2006.
       (c) Technical and Conforming Changes.--The Secretary of the 
     Treasury or the Secretary's delegate shall not later than 90 
     days after the effective date of this section, submit to the 
     Committee on Ways and Means of the House of Representatives 
     and the Committee on Finance of the Senate a draft of any 
     technical and conforming changes in the Internal Revenue Code 
     of 1986 which are necessary to reflect throughout such Code 
     the changes in the substantive provisions of law made by this 
     Act.
                                  ____


                                 S. 84

       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 2001''.

     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.
       (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 estate 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 estate 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 estate 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 this property to estate taxes upon the 
     death of the owner. Due to the capital intensive nature of 
     farming and its low return on investment, farmers are 15 
     times more likely to be subject to estate taxes than other 
     Americans.
       (9) As the average age of farmers approaches 60 years, it 
     is estimated that a quarter of all farmers could confront the 
     estate 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 estate 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) In General.--The table in section 2010(c) of the 
     Internal Revenue Code (relating to applicable credit amount) 
     is amended--
       (1) by striking ``2002 and 2003'' and inserting ``2002 or 
     thereafter'',
       (2) by striking ``$700,000'' and inserting ``$5,000,000'', 
     and

[[Page S345]]

       (3) by striking all matter beginning with the item relating 
     to 2004 through the end of the table.
       (b) Effective Date.--The amendments made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.
                                  ____


                                 S. 85

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

     SECTION 1. INCREASE IN GIFT TAX EXCLUSION.

       (a) In General.--Section 2503(b) of the Internal Revenue 
     Code of 1986 (relating to exclusions from gifts) is amended--
       (1) by striking ``$10,000'' each place it appears and 
     inserting ``$25,000'',
       (2) by striking ``1998'' in paragraph (2) and inserting 
     ``2002'', and
       (3) by striking ``1997'' in paragraph (2)(B) and inserting 
     ``2001''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to gifts made after December 31, 2001.
                                 ______