[Congressional Record Volume 148, Number 7 (Tuesday, February 5, 2002)]
[Senate]
[Pages S315-S316]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
REPEAL OF THE DEATH TAX
Mr. KYL. Mr. President, given the fact we are in morning business, I
wish to speak to the question of the repeal of the death tax to which
the Senator from Oklahoma just referred. As my colleagues will
remember, of course, the repeal of the death tax was part of the tax
package that was passed earlier in the year, but because of the unique
procedures of the Senate and the rules under which we operate, we could
only look to a 10-year period, as a result of which, perversely, we
phase down the death tax and end up repealing it in the ninth year, so
it is only effective for 1 year before the whole thing sunsets and we
go right back to the current situation with respect to the application
of the death tax.
I do not think most Americans realize that is what has happened, but
people who have to plan for their estates do realize it has happened.
This is why a permanent repeal of the death tax now would be so helpful
as a stimulus to the economy because all of the estate tax planning,
the insurance, and all the other activities people have to do to
provide against the possibility of paying the death tax must continue,
as it has in the last many years, with the uncertainty of knowing
whether or not, if ever, it is going to be permanently repealed and the
expenses of all that have to continue to be incurred, expenses that
could be put into investments so we could create jobs for our economy,
precisely what the President has talked about doing with his stimulus
package.
It is time for us to complete the job we began and see to it that the
repeal of the death tax is, in fact, permanent and, therefore,
meaningful.
Let me note some of the uncertainty that the lack of total repeal
causes our family businesses, our farms, and individuals.
As I said, the business owners are going to continue to have to do
the estate planning that is costly, cumbersome, and time consuming. If
we repeal permanently the death tax, then these resources can be
reinvested directly into these businesses, thus creating new job
opportunities and providing a much needed boost to local economies.
In June 2001, a bipartisan majority of Congress did, in fact, act
responsibly and provided this repeal of the death tax, much needed
relief to our American families, with that historic tax package. But if
we do not finish the job, we are going to be held in limbo with respect
to the death tax because it comes right back into play after the end of
the 10-year period.
The amendment I have offered will not be voted on until perhaps this
afternoon. It will repeal the death tax forever so that our children
and grandchildren will not have to worry about it or plan to have to
pay for it.
Actually, last year's tax legislation has had the perverse result
that more planning is necessary to deal with the death tax than
currently is the case. Accountants, lawyers, and insurance companies
are having a field day, frankly, with the uncertainty that is
encapsulated in the current state of the death tax legislation.
More planning is needed now because nobody knows for sure if and when
it will ever be fully repealed.
The sunset provision adds to the complexity of future death tax
planning, increasing wasteful costs that are an unproductive drag on
our economy. Until permanent repeal is certain, family businesses,
farms, and ranches must continue to pay the high cost of life insurance
policies, death tax planners, and tax attorneys. These expenses total
more than $12 billion a year according to CONSAD Research Corporation
in a study, ``The Federal Estate Tax: An Analysis of Three Prominent
Issues.'' That is money that could be saved, could be reinvested in
these businesses to create the kinds of job opportunities the President
is talking about in urging us to move on with an economic stimulus and
job creation package.
Clearly, burying the death tax will enable family businesses, farms,
and ranches to begin investing those billions and start providing more
stimulus. A more efficient utilization of these resources will result
in an immediate stimulus for the economy. More workers will be hired,
more capital assets purchased, and more productive goods produced if we
eliminate the confusion over the death tax's repeal.
I think we all understand why we repealed the death tax in the first
instance. In addition to the fact that a huge amount of money is spent
on estate tax planning, studies indicate we spend about the same amount
each year on the estate tax planning as is paid in estate taxes
altogether. So it is really a double taxation. We are paying an amount
of money to deal with the eventuality of paying an estate tax, and that
is paid by a lot of people who do not end up paying the tax but end up
having to pay the expenses of dealing with the existence of a death
tax, and then an equal amount of money is spent in the estate tax
itself.
In 2009, families, frankly, who are grieving their lost ones will be
faced with a potentially high 45-percent death tax rate. Fortunately,
they are going to be able to utilize a $3.5 million death tax exemption
which was enacted into law last year, but in 2010 families grieving for
lost ones will avoid the death tax entirely. They will only have a
total of $5.6 million of stepped-up basis, but that will effectively
exempt them from all future capital gains tax, a tax in any event of
which they would control the timing.
Then in 2011, families grieving their lost ones will feel the wrath
of a resurrected death tax returned to its 2001 rate potency. Rates
will be as high as 60 percent with a paltry $675,000 death tax
exemption. That is the way our repeal, at midpoint of last year,
worked. So it is a very unfair and arbitrary treatment for the death of
family members, as well as, as I said before, creating perverse
economic incentives.
[[Page S316]]
One can only imagine the extremes to which a family will go to keep
fatally ill family members alive in 2009. Nobody wants to predict or
argue for anyone to die in any particular year, and that is exactly the
perverse nature of the code that we have created now. Unless one dies
in the year 2010, they have a big problem. And for heaven's sake, do
not wait to die until the year 2011. Now what kind of tax policy is
that, where we say if one dies in the year 2010 they get full benefits
of repeal but if they hang on to life and die a year later they are
right back to where they were a year ago with a 60-percent tax rate and
an exemption that does not cover most of the family farmers and
businesses that we are talking about? That is horrible moral policy. It
is horrible economic policy. It cannot be the policy of the U.S.
Government and yet that is exactly what our repeal last year resulted
in, the reinstitution of the tax in the year 2010. It is an outrage
that our Tax Code would incorporate such arbitrary and immoral
incentives.
Of course that is not what we intended when we repealed the tax. It
is not what we intended when a bipartisan majority voted on that repeal
and passed it. We really wanted it to be forever, but again it was the
rules of the Senate that limited us to a 10-year program. So the best
solution would be to finish the job and permanently repeal the death
tax effective January 1, 2002. By making the tax repeal permanent in
2010, Congress can keep the promise it made last year. I think this is
the only moral way we can respond to this very immoral tax.
I will have more to say when we actually debate the amendment, but I
close by asking my colleagues to allow us to present this amendment and
have an up-or-down vote on it without playing parliamentary games. It
is possible that somebody could second degree this amendment. We could
play the game by second degreeing it. We could second degree somebody
else's amendment with this amendment. We can do all of those things,
but I think the American people would like for us not to be playing
games.
When I go home, that is what I hear all the time: Why do you guys go
back to Washington and play all of these, as they say, partisan games?
The repeal of the death tax and the passage of the tax bill was a
successful bipartisan effort. So I think it is important the majority
of us who approved that tax package, including the death tax
provisions, be given an opportunity to vote up-or-down on this
amendment, which finishes the job we started, and enable us to vote to
repeal the death tax permanently. If we cannot get that kind of a vote,
then all we are doing is hiding from the American people our views with
respect to this issue and allow a lot of people to say, oh, sure, yes,
I voted for repealing the death tax knowing full well that it was not
an effective appeal because it only existed for 1 year.
One better not wait to die the following year if they want to get the
advantage of what we did. That is a perverse policy. So I urge my
colleagues to allow this vote, up or down, on the death tax amendment.
We will be bringing it up this afternoon.
I am looking forward to a spirited debate on it. At the conclusion of
that debate, we need to stand up for what is right and true and vote
yes or no. If my colleagues do not want to make it permanent, then
stand up and say so and let everybody know exactly where they stand.
I think the majority of us are going to want to finish the job we
started, make this tax cut permanent, allow the people who otherwise
would have to spend $12 billion a year or more on estate planning to
put that money into more productive enterprises, to create jobs and
help us get out of the economic doldrums our country is in today.
It is good policy for the economy but, more importantly, it is good
policy for small businesses, farms, and the American people.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Is there a time limit on morning business?
The PRESIDING OFFICER. Up to 10 minutes.
Mr. GRASSLEY. I ask unanimous consent to have 15 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
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