[Congressional Record Volume 147, Number 74 (Friday, May 25, 2001)]
[Senate]
[Pages S5678-S5679]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             TAX CONFERENCE

  Mr. KYL. Madam President, our Senate colleagues are anxiously 
awaiting the report from the conference committee that is attempting to 
iron out the differences between the House-passed tax bill and the 
Senate-passed tax bill. I thought perhaps some who are waiting for this 
outcome would be interested in some thoughts with respect to what has 
gone on so far and what we might expect from the conference. In 
particular, I will address remarks to the part of the bill in which I 
was most involved.
  I begin by noting that the conferees, who are the people on the Ways 
and Means and Finance Committees, are busy at work trying to iron out 
the differences between the two bodies. Part of the success of getting 
the bill to the conference in the first place is attributable to the 
bipartisan leadership of the chairman of the Senate Finance Committee, 
Chuck Grassley of Iowa, and Max Baucus, the ranking Democrat from 
Montana. They worked very hard to develop a bill which wasn't all 
conservative or all liberal, all Republican or Democrat, but which 
represented views of a substantial part of the membership of the 
committee on both sides of the aisle. It represents most of what 
President Bush wanted, but not all, and not quite to the same degree, 
because by definition it is a compromise.
  Because of that compromise, and it had support from both sides of the 
aisle, over the course of the last week there were 45 different 
attempts to amend the bill. Every one of them failed. In other words, 
the Members of this body voted time after time after time to support 
the work of the Senate Finance Committee, understanding it represents a 
good compromise.
  Of course, there has to be another compromise, and that is with the 
House of Representatives. The bill the House passed represents a little 
more closely the views of President Bush. Naturally, those on the 
Republican side of the aisle are hoping there will be a compromise 
between the House and Senate versions that truly does reflect a meeting 
of the minds.
  The Senate-passed bill was only a total of 10 years of $1.35 trillion 
because that was the compromise amount. That meant we could not grant 
relief quite as robust as the House had done earlier. All of the 
Republicans and 12 Democrats voted in favor of that bill.
  From my perspective, it was not perfect; it certainly was a very good 
step toward tax relief, providing, most importantly, marginal tax 
relief from income tax rates and significant relief from the estate tax 
and eventual repeal, after 10 years, of the estate tax.
  I am hopeful this conference committee will be able to reach a 
conclusion and enable the Senate to pass this bill sometime tonight or 
tomorrow, whatever might be the time.
  I will discuss primarily the provisions relating to the phaseout and 
eventual elimination of the death tax in the year 2011. The death tax 
provisions being negotiated now, it is my understanding, are not as 
much as either in the House-passed bill or the Senate-passed bill. The 
reason is because there has been an effort to accommodate more Members 
with what they wanted to include in the bill. Everything else has to 
give. The net result is, according to my understanding, that the range 
they are talking about now, out of a total of $1.35 trillion, is about 
$135 billion, or 10 percent.

  For practical purposes, about 10 percent of the tax relief under the 
bill goes to rate reduction of the death tax and an increase in the 
exemption and eventual repeal in the 10th year. President Bush, by 
contrast, allocated $260 billion for death tax relief. We are trying to 
get by to do more with less.
  Probably the most important thing is there has been an understanding 
both in the House and in the Senate reflecting the will of the American 
people that there is something terribly unfair about a provision of the 
Tax Code that literally taxes people because they die; not because they 
sold an asset; not because they saved or invested or had some other 
kind of economic transaction that they fully knew the tax consequences 
of but, rather, they are taxed because they die.
  We have come to conclude, representing the view of the majority of 
Americans, there is something very unfair about taxing people after 
they die. Actually, you are not even taxing the person who died. You 
are taxing that person's heirs--the spouse, the children--at the very 
worst time of their life following this tragic event. It is not fair. 
It doesn't represent good tax policy.
  There is a good way to substitute the capital gains tax for the 
estate tax, so that the assets end up being taxed but being taxed the 
same as any other assets, based upon an economic decision, if and when 
those assets are sold, and then taxed at the capital gains rates. But a 
tax is not imposed at the time of death. Fundamentally, death should 
not be a taxable event and that is a core principle that will come out 
of this tax bill. It is a core principle embodied in the repeal of the 
estate tax, sometimes called the death tax.

  To me, the most interesting thing to come out of this debate is the 
realization that the American people have a fundamental sense of 
fairness. When you ask them whether it is fair to tax at the rate of 
about 25 percent, for example, they say no; we ought to get taxes down.
  When you ask them if it is fair that death should be a taxable event, 
they say no, even if they do not think they are ever going to benefit 
personally from repeal of the estate tax. Fairness is what this effort 
to repeal the death tax is all about.
  What I mostly wanted to do today is to report the results of a 
national poll of just this week. So we are not talking about something 
a long time ago--just this week, a very objective poll. So it has a 
very low margin of error. It is a poll by the respected McLaughlin & 
Associates of a thousand likely voters from around this country.
  Here is one of the questions they asked. They wanted to ask the 
question, in effect, in the worst way possible. They said: Do you 
believe it is fair or unfair for Congress to impose a 40-percent or 
greater tax on an estate worth $1 billion?
  You could say, Do you think the death tax is unfair? I guarantee at 
townhall meetings people say: No, the death tax is not fair. That is 
not really putting the question in the most objective way. But when you 
ask: Is it fair or unfair for Congress to impose a tax of, be specific, 
40 percent or more on estates--you don't use the death tax 
terminology--on estates of $1 billion or more, that is the loading of 
the question. That is the part that biases it, $1 billion or more, 
should you tax them at more than 40 percent?
  Do you know what the answer is? By 60 percent the American people 
say: No, it is unfair. Only half that many said it was fair. How many 
of those people do you think would benefit from a repeal of that estate 
tax? Out of 1000, I don't know, maybe one but maybe not. There are not 
many people in this country leaving an estate of $1 billion. Yet all 
Americans realize it is fundamentally unfair to impose a tax of more 
than 40 percent.
  Of course, I might add the law currently is that it is about a 60-
percent tax rate, but the question was not biased.
  I think what that shows is right this week the vast majority, by 2 to 
1, of Americans believe that even a tax rate

[[Page S5679]]

of 40 percent is unfair. The reason that is significant is in the 
Senate bill we were not able to reduce the tax rate on estates of even 
$5 million, let alone $1 billion, to that 40 percent level. As a matter 
of fact, I think we got it down to 45 percent, if I am not in error. 
Yes, we reduced the rate from 60 percent down to 45 percent. The House 
got it down into the 30s. I have forgotten whether it is 37 or 39 but 
something like that. We ought to be working to reduce the rate below 40 
percent before the tax is finally eliminated in the 10th year. But we 
were not able to do that. I hope that is something the conference 
committee will work to do, to try to bring that rate down just as much 
as they possibly can.
  What is interesting about this survey that shows that American people 
are fundamentally fair minded is that the results were the same across 
economic and political classes. For example, just as many voters who 
earned under $20,000 as those earning over $100,000 said the practice 
was unfair; exactly 61 percent in both cases. It is consistent across 
the political spectrum, very similar. Among Republicans, 65 percent 
said it was unfair. Remember the baseline is 61 percent. Slightly more 
Republicans, 65 percent, said it was unfair. Slightly fewer Democrats, 
54 percent, said it was unfair; and Independents, 62 percent, almost 
right on the button.
  The bottom line is, whether Republican or Democrat or independent, a 
substantial majority believe that even a 40-percent tax on $1 billion 
estate is unfair.
  The other interesting thing is this survey tracks all the other 
surveys I have seen over time. I will go back just 1 year because that 
is a nice frame. But the clear and resounding message is the estate tax 
is unfair and ought to be stricken from the code. The same McLaughlin & 
Associates conducted a poll earlier this year, in January. It found 
then that 89 percent of the people surveyed believed it was not fair 
for Government to tax a person's earnings while it is being earned and 
then tax it again after the person dies--which is exactly what the 
estate tax does.
  Mr. President, 79 percent approved the idea of abolishing the estate 
tax--79 percent. That is very consistent with other surveys as well.
  I went back a year ago because there is an interesting Gallup Poll 
that was done just a year ago--not quite a year ago. It found 60 
percent of the people supported the repeal, even though about three-
fourths of them believed they would never receive any direct benefit 
from that repeal.
  Again, it goes to the notion of fairness. People believe an unfair 
tax should be repealed even if it is not going to help them at all. The 
reality is it probably would help them in terms of its indirect 
benefits. I noted during the debate on the estate tax the economic 
benefits to repeal, in terms of new jobs created, the infusion of 
capital into the economy, the growth of the economy--all these things 
would be significantly benefited from a repeal of the estate tax. Of 
course, that benefits all Americans.
  As John F. Kennedy said, in a different context, with respect to tax 
relief, ``A rising tide lifts all boats.'' So if you can help the 
American economy, it helps everybody in the economy, even if you are at 
the lower end. So the reality is, repealing the estate tax does help 
all Americans. But it obviously helps some more than others. It 
especially helps those in two categories: First of all, those who pay 
the tax. That is not very many people. It is maybe in the hundreds of 
thousands--maybe a million, I don't know. But if you take members of 
families who are directly affected by this, clearly it is a number that 
is very much in the millions, if at all. Yet Americans fundamentally 
believe it is unfair to tax them.
  The other larger group that is affected by the tax is, of course, all 
the people, especially the small business people--family-owned farms 
and family-owned businesses--who have to spend their money to try to 
plan their estate in such a way as to minimize the estate tax 
liability. This is difficult and expensive.
  The Women-Owned Business Association--by the way, women-owned 
businesses represent more than half the small business in this country. 
They surveyed their members and found--just 2 years ago I believe it 
was--the average small business spent $60,000 to do this expensive 
estate planning.
  I note there was an op-ed in the Washington Post this morning by a 
very wealthy American who testified before the Finance Committee. He 
said it was really a shame we were going to do away with the estate 
tax. Of course, his point was he didn't think the American people 
really believed that way; yet I think the survey results show that they 
are. But people like this individual have the money to do the estate 
planning. They do not suffer from the tax. It is the small businesses 
and family-owned businesses and farms that end up having to pay a lot 
of money to buy insurance, to pay lawyers and accountants and estate 
planners to try to avoid the tax.
  The real cost of the tax is at least as much, and probably more, in 
the wasted money spent to avoid paying the tax than it is the revenue 
to the Federal Government in the first place. Mr. President, 2 years 
ago when the tax collected about $20 billion, there is a study that 
showed that almost exactly the same amount of money, by coincidence, 
about $23 billion additional, was spent by people to avoid paying the 
estate tax or minimize their liability. So it is a very inefficient 
tax, as economists Henry Aaron and Alicia Munnell said in writing a 
1992 study. They said death taxes ``have failed to achieve their 
intended purpose. They raise little revenue. They impose large excess 
burdens. They are unfair.''

  I think the thing to note at this point in time in this Chamber, at 
about 2:20 on Friday afternoon, is that the conference committee is 
working away trying hard to bridge the gap between the House and Senate 
versions of the estate tax. I think all of us are hopeful that they 
will conclude their work so we can vote on the bill and provide tax 
relief to Americans.
  This is a bill which provides relief all the way from the refundable 
tax credits, literally providing money to people who do not pay taxes, 
all the way up to those few people who, as I said, would receive relief 
from the estate tax. But most importantly, it would provide marginal 
rate relief for all Americans.
  We have an opportunity now. I hope that we can drive the rates of the 
estate tax down prior to the repeal but, in any event, we will have 
struck a blow for fairness in this country by reducing marginal rates; 
reducing, if not eliminating, the marriage penalty, which is very 
unfair; and, finally, getting rid of a tax that a majority of Americans 
believe is very unfair, a tax that literally requires people to pay 
money to the Government because they died, the estate tax.
  Madam President, we have a wonderful opportunity. I hope the 
conferees come back soon and we will have a chance to vote on this 
legislation.
  Again, I commend the members of the conference and, in particular, 
the bipartisan leadership in the Senate, Senator Grassley and Senator 
Baucus, for the fine work they have done to get it this far.
  I just hope now we can conclude the work and send it down to the 
President for his signature and the benefit of the American people.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. THOMAS. Madam President, I yield myself a few minutes to talk 
about energy this afternoon, if I may, please.
  First, I thank my friend from Arizona for a very complete discussion 
of the tax reduction bill. Certainly, it is one of the most important 
things we will do during this Congress, and, indeed, over the next 
number of years.
  The whole question, in the broad sense, of how you do taxes is very 
interesting. One question is, How are they fair? How do you make them 
fair among all the taxpayers? Another question is certainly the amount. 
How do you justify taking this money from citizens and it going to the 
Government? And when you have more than enough, what do you do with the 
surplus?
  So I thank the Senator very much.

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