[Congressional Record Volume 148, Number 76 (Tuesday, June 11, 2002)]
[Senate]
[Pages S5343-S5358]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   DEATH TAX ELIMINATION ACT OF 2001

  The PRESIDING OFFICER. Under the previous order, the clerk will 
report H.R. 8.
  The senior assistant bill clerk read as follows:

       A bill (H.R. 8) to amend the Internal Revenue Code of 1986 
     to phase out the estate and gift taxes over a 10-year period, 
     and for other purposes.

  Mr. REID. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I ask unanimous consent Senators Gramm and 
Kyl be recognized for 5 minutes each; however they want to divide up 
the 10 minutes to speak on the general subject of the estate tax, and 
Senator Conrad be recognized for up to 10 minutes. Following that, we 
would be, I believe, in a position to lay down the first-degree 
amendment at that time pursuant to the order and the 2-hour time will 
start running at that time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Texas.
  Mr. GRAMM. Mr. President, let me take a couple of minutes to tell 
people where we are. We worked out an agreement several weeks ago to 
debate the permanent repeal of the death tax. I thank the majority 
leader for agreeing to allow this to happen. We now have a unanimous 
consent agreement that dictates how the debate will occur. I will go 
over it so everyone will know exactly what we are doing.
  Under the unanimous consent agreement, a majority member, a Democrat, 
will be recognized to offer a first-degree amendment related to the 
death tax. That amendment, by a majority member, will be subject to two 
second-degree amendments also offered by majority members. Those two 
second-degree amendments will be disposed of--either with a point of 
order, a motion to table, or a vote--and will be accepted or rejected. 
Then there will be one amendment standing, whether it is amended or 
not, and it will be voted on. Then I will be recognized to offer a 
first-degree amendment. It will not be subject to an amendment. I will 
offer an amendment identical to the permanent repeal of the death tax 
adopted by the House of Representatives. So if my amendment is be 
adopted, the bill would again pass the House and the President could 
sign it into law.
  If any other amendments should be adopted, we have to have a debate 
as to whether we would name conferees and we would potentially have to 
go to conference with the House.
  That is basically where we are. We are now awaiting the offering of a 
first-degree amendment. Then that will be subject to two second-degree 
amendments, offered by the majority. We will vote on each one of them, 
in order, and then we will vote on the underlying amendment. I assume 
we would probably get through one vote this afternoon and then we would 
have three votes tomorrow and we would finish up tomorrow sometime in 
the mid-early afternoon if all the time is used.

  I remind my colleagues there are 2 hours on the first second-degree 
amendment, 2 hours on the second second-degree amendment, 2 hours on 
the underlying first degree, and then there would be 2 hours on my 
amendment which would repeal the death tax, in exactly the same form 
the House has passed, and then there would be a vote on it and we would 
be finished.
  That is where we are in terms of the structure of the debate. I 
wanted everyone to understand exactly where we are. I reserve the 
remainder of my time.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, this afternoon we begin a very important 
debate on the question of the estate tax. My friends on the other side 
characterize it as a death tax. It is really not. There is no such 
thing as a death tax in America. Nobody pays taxes at death. There is 
an estate tax. For estates over a certain amount, they contribute to 
the revenue of the Federal Government by paying an estate tax.
  The problem with the current estate tax is that it cuts in at too low 
a level. Currently, estates begin to be taxed at about $1 million. The 
fact is, only about 2 percent of all estates pay any tax, even under 
that circumstance. But with what has happened in the national economy, 
many of us believe we do need to reform the estate tax--not eliminate 
it but reform it.
  Why? First of all, because it is not fair to have the estate tax cut 
in at that level, given the increase in assets that has occurred in the 
country in the last decade. At the same time, it does not make much 
sense to us to eliminate the estate tax completely because of the cost. 
What our friends on the other side of the aisle are proposing is a $100 
billion cost in this decade and a $740 billion cost in the next decade, 
right at the time the baby boom generation retires--all of this in the 
context of budget deficits as far as we can see.
  I believe we ought to reform the estate tax. I believe we ought to 
increase the level at which it cuts in on individuals and their 
families. But to eliminate the estate tax and dig the deficit hole 
deeper, put us deeper into debt and take it all out of Social Security, 
I do not think is defensible.
  Last year, the President said this about paying down the debt:

       My budget pays down a record amount of national debt. We 
     will pay off $2 trillion of debt over the next decade. That 
     will be the largest debt reduction of any country, ever. 
     Future generations should not be forced to pay back money 
     that we have borrowed. We owe this kind of responsibility to 
     our children and grandchildren.

  What a difference a year makes, because just a few hours ago we 
responded to the President's request for the biggest increase in the 
debt--the second biggest increase in the debt in our Nation's history. 
That is what we did just hours ago. Has this Chamber already forgotten? 
Have we already forgotten that we just responded to the President, who 
said he was going to pay down the biggest amount of debt in our 
Nation's history, in fact he said the biggest amount of any country 
ever? And now, just 2 hours ago, 3 hours ago, we responded to his 
request for not debt paydown but the biggest expansion of the debt--the 
second biggest expansion in our Nation's history?
  Here is the comparison. The only time we had a bigger increase in the 
debt than what the President is seeking was when his father was 
President. When his father was President, we had to increase the debt 
by $915 billion, in November of 1990. Now this President comes and asks 
for a $750 billion increase in the debt. That is after telling

[[Page S5344]]

us last year he was going to pay down the debt by the maximum amount 
possible, the biggest of any country ever.
  Last year, the President told us it would be 7 years before we would 
have to increase any debt. In August of last year, he told us it would 
be 3 years before any increase in the debt. In December 2001, he told 
us 2 months. Right now, the Treasury Department is using extraordinary 
means to finance the debt of the United States. They are taking from 
the retirement funds of Federal employees to cover the Federal debt.
  Let me say this. If any private company tried that, they would be on 
their way to a Federal facility, but it would not be the White House of 
the United States, it would not be the Congress of the United States, 
they would be on their way to a Federal penitentiary because that is a 
violation of Federal law. But that is what is going on right now.
  You recall in the previous administration they did that for a short 
time and in the House of Representatives our friends across the aisle 
filed impeachment proceedings against the Secretary of the Treasury for 
doing what this Secretary of the Treasury is now doing.
  Can we forget what just happened a few hours ago, when there was a 
vote here to increase the debt of the United States by $450 billion? 
The President requested $750 billion in increased debt. We increased it 
$450 billion.
  Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER. The Senator has used 6 minutes of his 10; 4 
minutes remain.
  Mr. CONRAD. Mr. President, remember last year? We have to put this in 
context. We have to think about the circumstance within which we are 
making decisions. Last year, we were told there was going to be $5.6 
trillion of surpluses over the next decade. That is what we were told 
just last year. Now we look at the budget circumstance of the United 
States, and the surpluses are all gone. There are no surpluses. In 
fact, if we look at the President's budget and we look at the latest 
shortfall in revenues and we look at the stimulus package just passed, 
what we see over the next decade is not $5.6 trillion of surpluses, 
what we see is $600 billion of deficits. It is a pretty stunning 
turnaround. In 1 year we go from $5.6 trillion of surpluses to $600 
billion of deficits. And our friends on the other side want to dig the 
hole much deeper--much deeper--by adding $100 billion, and another cost 
in the next 10 years of $740 billion, right at the time the baby boom 
generation retires. It does not make much sense to me to eliminate this 
estate tax instead of reforming it.

  Yes, let's address the problems that exist with the estate tax. Let's 
increase the amount of the exemption in a responsible and rational way. 
But let's not dig the hole deeper and deeper with respect to the 
deficits and debt of this country.
  Here is where we are, looking back to 1992, when there were deep 
deficits, not counting Social Security. We were able, over a period of 
years, to pull our country out of this deficit and debt morass. We were 
able to run surpluses for 3 years. But look at what happened last year. 
We are right back in the soup. For anybody who thinks it is going to be 
short-lived, here is the hard reality. We are poised to be back in 
deficit for the entire next decade--billions, hundreds of billions of 
dollars of deficit and debt.
  Again, I say our friends on the other side, in their proposal, say: 
Don't worry about that; don't worry about all this red ink; don't worry 
about all these deficits; don't worry about piling up the debt; let's 
just go out there and cut some more taxes and not pay for it. That is 
their answer. They will add another $100 billion to these deficits over 
the next decade. But what is really stunning is in the second 10-year 
period they would take another $740 billion right out of Social 
Security trust funds.
  There is an alternative that deals both with the question of 
reforming the estate tax and making it more fair and at the same time 
reducing the cost dramatically over what our friends on the other side 
of the aisle are proposing.
  What I am proposing is immediate relief. Take the estate tax 
exemption to $3 million next year--$1 million now, and increase that to 
$3 million next year--$6 million for a couple for 2009, and thereafter 
the exemption would increase to $3.5 million. The maximum estate tax 
rate would be frozen at 50 percent. We retain the stepped-up basis.
  Mr. President, I ask for an additional 3\1/2\ minutes and for the 
other side as well.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. CONRAD. Mr. President, we have retained the stepped-up basis. The 
other side's proposal goes to what is called a carryover basis.
  This is a hugely important issue that people should understand. We 
will have a chance to go into it as we proceed.
  Let me say at this point that in a stepped-up basis, when a relative 
dies, you inherit their property at its value at the time they die.
  That is a very important concept to understand. Let me repeat it.
  Under a stepped-up basis, you pay future taxes based on the value of 
the property of the loved one that is giving you the property. You pay 
on the basis of the value of the property at the time they died--not 
what they paid for it but the value at the time they died.
  Under the alternative proposal offered on the other side, you are 
going to go to what is called a carryover basis. You are not going to 
pay future taxes based on the value at the time that your relative 
died. You are going to go back to the value of what they paid for it.
  Let us say you inherit a farm. You don't inherit the value of the 
farm at the time your father died or your grandfather died. You are 
going to pay future taxes based on what they paid for the property.
  There is a big difference between our proposals. It is an accounting 
nightmare.
  What our friends are proposing we tried before--the carryover basis, 
going back to what grandpa paid for a property. It was an 
administrative nightmare for all concerned. And we quickly abandoned 
it. They want to go back to the bad, old days.
  Not only does this proposal fundamentally reform the estate tax and 
make it more fair and avoid going to carryover basis, but it also saves 
hundreds of billions of dollars in the second decade. In this decade it 
saves $87 billion. The cost of our proposal in this decade is $12.5 
billion. The cost of their proposal is $99.4 billion.
  Under the proposal I am making, by 2009, only .3 percent of estates 
will face any estate tax liability. That means 99.7 percent of estates 
would pay zero, nothing, have no estate tax liability.
  We will have more to say about this as we go forward.
  At this point, I want to yield the floor so my colleague from 
Arizona, Senator Kyl, can have a chance at this initial moment to speak 
on this subject.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Mr. President, in addition to the 3 minutes granted by the 
extension, I inquire about how much time remains on our side.
  The PRESIDING OFFICER. Ten minutes.
  Mr. KYL. Which includes the 3 minutes.
  The PRESIDING OFFICER. That is correct.
  Mr. KYL. I will speak for 5 minutes, and our colleague from Texas 
will speak for 5 minutes.
  I thank the Chair.
  Mr. President, let me make three points.
  First of all, I find it very interesting that our Democratic 
colleague is worried about the debt of the United States. This does not 
seem to be much of a concern to him or his colleagues when they vote 
for spending bills around here.
  Just recently--I took some of the more recent ones--the railroad 
retirement bill was $15 billion in one payment. I voted against that. 
The farm bill was $82.8 billion over the baseline, over the budgeted 
amount. I voted against that.
  Mr. CONRAD. Will the Senator yield?
  Mr. KYL. I am happy to yield for a moment--for a moment, please.
  Mr. CONRAD. The amount that the Senator refers to is not over the 
budget. Every penny of the money in the

[[Page S5345]]

farm bill is within the budget. Does he acknowledge that?
  Mr. KYL. No. Let me reiterate what I said. The fact is that the 
distinguished Senator from North Dakota, chairman of the Budget 
Committee, has not been able to bring a budget to the floor. So there 
is no budget. We are talking about the baseline. I believe my number is 
accurate with respect thereto. We are spending billions on this farm 
program above what we originally had decided to spend; under trade 
adjustment assistance, over $11 billion over the President's request--a 
10-year number; in the supplemental that we just passed--a 1-year 
number--about $4 billion above the President's request.
  The highway bill is about 5.7 above the President's request.
  My point is that it seems to be a little contradictory when some 
colleagues are so concerned about the debt, and all of a sudden they 
are happy to spend very large sums of money above the baseline.
  Let us get into this debt business a little bit more. With what do we 
pay down debt?
  We pay down debt with Social Security income. Under Social Security 
revenues--the FICA tax--you pay in 7.6 percent and your employer pays 
7.6 percent. That is Social Security.
  The death tax receipts don't pay for Social Security. Not one nickel 
of the death tax collections or estate tax collections pay for Social 
Security benefits--not one nickel. If we repeal the entire death tax 
today, Social Security wouldn't lose one nickel because that isn't 
where Social Security gets its money. You all know where Social 
Security gets its money--from the FICA tax, the Social Security 
payments. Those right now are in surplus.
  What do we do with the surplus? We pay down the debt with it.
  If my colleagues are worried about the need to pay down the debt, 
then they are talking about taxes, Social Security money, and paying 
down the debt with that. That is exactly what happens every single 
year. We all agree to that.
  If they are worried about taking away money for Social Security, then 
they need to be worried about the Social Security tax collections and 
not the estate tax collections. None of that money goes for Social 
Security.
  This is a bogus argument that Social Security would in any way be 
affected by a reduction of the estate tax collections.
  Finally, to this argument that somehow it is unfair for us to step up 
the basis--or, rather, to carry over the basis rather than have a 
stepped-up basis, this may seem to be an arcane argument to folks who 
aren't familiar with these terms. Here in practical terms is what it 
means.

  You have a billionaire and he dies. His wife inherits the money. 
Under the proposal of the Senator from North Dakota, if the spouse 
decides the day after her dear loved one's departure to sell all of 
that property, cash it in, do you know how much she pays in capital 
gains tax? Zero. Zip. Nothing. That is how much you pay under the 
amendment of the Senator from North Dakota.
  Under our proposal, you would pay the capital gains on the original 
value of the property.
  If her dear loved one bought that property for $100 million way back 
when and sells it for $1 billion, that is a $900 million gain. She 
would pay a capital gains tax on that again.
  Our idea is that death should not be a taxable event. You can't 
anticipate it. It is the worst possible time to have to pay a tax. It 
is not fair. Most of the Tax Code says you pay a tax when you do 
something knowing what the tax consequences will be. You earn money, 
you sell property--those are taxable events. What we are doing is 
replacing one tax for another.
  The estate tax is unfair, it is wrong, and it should be repealed. It 
will be replaced by a capital gains tax.
  The interesting thing about it is that really wealthy people will end 
up paying a tax when they sell that property; whereas, they would not 
pay nearly as much tax as they would under the amendment of the Senator 
from North Dakota.
  What it really boils down to is you are still paying the tax. What it 
really boils down to is a matter of policy. You are going to pay sooner 
or later. But do you want to pay with death being the taxable event or 
do you want to pay a tax based on an economic decision you made knowing 
what the tax consequences would be. That is what our Tax Code theory is 
and the death tax should comport with that.
  The PRESIDING OFFICER. The Senator from Texas is recognized for 4\1/
2\ minutes.
  Mr. GRAMM. I don't mind yielding to my Democratic colleague.
  Mr. CONRAD. I inquire as to the time.
  The PRESIDING OFFICER. Four and one-half minutes remain to the 
Senator from Texas.
  Mr. CONRAD. Do I have time on my side?
  The PRESIDING OFFICER. No, you do not.
  Mr. GRAMM. Mr. President, we all understand that the death tax 
basically says if somebody works a lifetime, they scrimp and save and 
sacrifice, they plow the money back into their business or their farm 
or their estate, they do it for their family, and then they die, then 
their family has to sell their business or sell their farm or sell off 
their estate to give the government a double taxation of 55 cents out 
of every dollar they have earned in their lives. It is an absolute 
outrage. The American people believe that.

  Today and tomorrow, as we debate this issue, our Democrat colleagues 
are not going to defend the death tax as such. They are going to try to 
make a series of points. You are going to get to hear it in the long 
debate, but since we are waiting for them to come forward with their 
amendment, I want to make some points early on. They are going to say: 
OK, it is wrong to make people sell off their life's work, but 
shouldn't we redistribute wealth? Shouldn't we say that above a certain 
level we are going to have a death tax? They are basically going to try 
to appeal to this old class struggle, this old Marxist idea that has 
been rejected everywhere else in the world but still carries currency 
in the United States of America.
  The second thing they will do is say: Look, we wanted to repeal the 
death tax but we can't afford it. We just can't afford it. Let me 
remind my colleagues, we don't have to go way back to the railroad 
retirement debate of last year to see that this is not true. Let's go 
to last Thursday. Last Thursday this body, the Senate, voted 
overwhelmingly--and I think almost every Democrat Member of the Senate 
voted for the bill--to spend $14 billion more than the President 
requested for nonemergency items in a supplemental appropriation. 
That's $14 billion more than the President asked for in nonemergency 
items. That is 4 times what it costs to repeal the death tax next year.
  So our colleagues today are brokenhearted: You would repeal the death 
tax and deny the Government that money, and we are so worried. They are 
worried about the deficit and the debt. Where were they Thursday? Where 
were they Thursday night? I was here. I raised a point of order against 
80 amendments. Where were they? They were willing to spend four times 
as much this coming year on spending the President didn't ask for in an 
emergency bill than it would cost to repeal the death tax.
  On the farm bill, they were willing to spend seven times as much as 
the cost of repealing the death tax. Now they are worried about the 
debt. They are worried about the deficit. But last month when we passed 
this bloated, inflated farm bill, they were willing to spend seven 
times as much as it would cost this coming year to repeal the death 
tax. They were not worried then, but they are really worried today.
  Then there was the energy tax incentive. They weren't worried then. 
They were willing to spend more on energy tax incentives than it would 
cost next year to repeal the death tax.
  Finally, just to add insult to injury, on the budget that was 
reported on a straight party-line vote out of the Budget Committee, the 
Democrat majority increased nondefense discretionary spending by a 
whopping $105.8 billion above the level requested by the President. In 
other words, when they cast that vote, they could afford $106 billion. 
That is more than enough to fund the repeal of the death tax for the 
next 10 years.
  I know they are upset today. They are very upset about the deficit 
and the debt. But they are only upset when we

[[Page S5346]]

are talking about letting people keep more of what they earn. They are 
never, ever upset when it comes to spending money.
  They write a budget that spends more money on new discretionary 
programs than repealing the death tax would cost, but when it is time 
to let people keep money, they are worried.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Senator from Nevada.
  Mr. REID. It is my understanding that all time has been used that was 
previously allocated.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. REID. I would now say to the Chair that under the unanimous 
consent request before the Senate, there is an opportunity now for the 
majority to lay down an amendment; is that correct?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. REID. I ask that Senator Conrad be recognized for that purpose.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from North Dakota.


                           Amendment No. 3831

  Mr. CONRAD. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from North Dakota [Mr. Conrad] proposes an 
     amendment numbered 3831.

  Mr. CONRAD. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

  (Purpose: To amend the Internal Revenue Code of 1986 to restore the 
                     estate tax with modifications)

       Strike all after the enacting clause, and insert the 
     following:

     SECTION 1. RESTORATION OF ESTATE TAX; REPEAL OF CARRYOVER 
                   BASIS.

       (a) In General.--Subtitles A and E of title V of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001, 
     and the amendments made by such subtitles, are hereby 
     repealed; and the Internal Revenue Code of 1986 shall be 
     applied as if such subtitles, and amendments, had never been 
     enacted.
       (b) Sunset Not To Apply.--
       (1) Subsection (a) of section 901 of the Economic Growth 
     and Tax Relief Reconciliation Act of 2001 is amended by 
     striking ``this Act'' and all that follows and inserting 
     ``this Act (other than title V) shall not apply to taxable, 
     plan, or limitation years beginning after December 31, 
     2010.''.
       (2) Subsection (b) of such section 901 is amended by 
     striking ``, estates, gifts, and transfers''.
       (c) Conforming Amendments.--Subsections (d) and (e) of 
     section 511 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001, and the amendments made by such 
     subsections, are hereby repealed; and the Internal Revenue 
     Code of 1986 shall be applied as if such subsections, and 
     amendments, had never been enacted.

     SEC. 2. MODIFICATIONS TO ESTATE TAX.

       (a) Increase in Exclusion Equivalent of Unified Credit.--
       (1) In general.--Subsection (c) of section 2010 of the 
     Internal Revenue Code of 1986 (relating to applicable credit 
     amount) is amended by striking all that follows ``the 
     applicable exclusion amount'' and inserting ``. For purposes 
     of the preceding sentence, the applicable exclusion amount is 
     $3,000,000 ($3,500,000 in the case of estates of decedents 
     dying after December 31, 2008).''.
       (2) Earlier termination of section 2057.--Subsection (f) of 
     section 2057 of such Code is amended by striking ``December 
     31, 2003'' and inserting ``December 31, 2002''.
       (b) Maximum Estate Tax Rate To Remain at 50 Percent; 
     Restoration of Phaseout of Graduated Rates and Unified 
     Credit.--Paragraph (2) of section 2001(c) of such Code is 
     amended to read as follows:
       ``(2) Phaseout of graduated rates and unified credit.--The 
     tentative tax determined under paragraph (1) shall be 
     increased by an amount equal to 5 percent of so much of the 
     amount (with respect to which the tentative tax is to be 
     computed) as exceeds $10,000,000. The amount of the increase 
     under the preceding sentence shall not exceed the sum of the 
     applicable credit amount under section 2010(c) and 
     $224,200.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2002.

     SEC. 3. VALUATION RULES FOR CERTAIN TRANSFERS OF NONBUSINESS 
                   ASSETS; LIMITATION ON MINORITY DISCOUNTS.

       (a) In General.--Section 2031 of the Internal Revenue Code 
     of 1986 (relating to definition of gross estate) is amended 
     by redesignating subsection (d) as subsection (f) and by 
     inserting after subsection (c) the following new subsections:
       ``(d) Valuation Rules for Certain Transfers of Nonbusiness 
     Assets.--For purposes of this chapter and chapter 12--
       ``(1) In general.--In the case of the transfer of any 
     interest in an entity other than an interest which is 
     actively traded (within the meaning of section 1092)--
       ``(A) the value of any nonbusiness assets held by the 
     entity shall be determined as if the transferor had 
     transferred such assets directly to the transferee (and no 
     valuation discount shall be allowed with respect to such 
     nonbusiness assets), and
       ``(B) the nonbusiness assets shall not be taken into 
     account in determining the value of the interest in the 
     entity.
       ``(2) Nonbusiness assets.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonbusiness asset' means any 
     asset which is not used in the active conduct of 1 or more 
     trades or businesses.
       ``(B) Exception for certain passive assets.--Except as 
     provided in subparagraph (C), a passive asset shall not be 
     treated for purposes of subparagraph (A) as used in the 
     active conduct of a trade or business unless--
       ``(i) the asset is property described in paragraph (1) or 
     (4) of section 1221(a) or is a hedge with respect to such 
     property, or
       ``(ii) the asset is real property used in the active 
     conduct of 1 or more real property trades or businesses 
     (within the meaning of section 469(c)(7)(C)) in which the 
     transferor materially participates and with respect to which 
     the transferor meets the requirements of section 
     469(c)(7)(B)(ii).

     For purposes of clause (ii), material participation shall be 
     determined under the rules of section 469(h), except that 
     section 469(h)(3) shall be applied without regard to the 
     limitation to farming activity.
       ``(C) Exception for working capital.--Any asset (including 
     a passive asset) which is held as a part of the reasonably 
     required working capital needs of a trade or business shall 
     be treated as used in the active conduct of a trade or 
     business.
       ``(3) Passive asset.--For purposes of this subsection, the 
     term `passive asset' means any--
       ``(A) cash or cash equivalents,
       ``(B) except to the extent provided by the Secretary, stock 
     in a corporation or any other equity, profits, or capital 
     interest in any entity,
       ``(C) evidence of indebtedness, option, forward or futures 
     contract, notional principal contract, or derivative,
       ``(D) asset described in clause (iii), (iv), or (v) of 
     section 351(e)(1)(B),
       ``(E) annuity,
       ``(F) real property used in 1 or more real property trades 
     or businesses (as defined in section 469(c)(7)(C)),
       ``(G) asset (other than a patent, trademark, or copyright) 
     which produces royalty income,
       ``(H) commodity,
       ``(I) collectible (within the meaning of section 401(m)), 
     or
       ``(J) any other asset specified in regulations prescribed 
     by the Secretary.
       ``(4) Look-thru rules.--
       ``(A) In general.--If a nonbusiness asset of an entity 
     consists of a 10-percent interest in any other entity, this 
     subsection shall be applied by disregarding the 10-percent 
     interest and by treating the entity as holding directly its 
     ratable share of the assets of the other entity. This 
     subparagraph shall be applied successively to any 10-percent 
     interest of such other entity in any other entity.
       ``(B) 10-percent interest.--The term `10-percent interest' 
     means--
       ``(i) in the case of an interest in a corporation, 
     ownership of at least 10 percent (by vote or value) of the 
     stock in such corporation,
       ``(ii) in the case of an interest in a partnership, 
     ownership of at least 10 percent of the capital or profits 
     interest in the partnership, and
       ``(iii) in any other case, ownership of at least 10 percent 
     of the beneficial interests in the entity.
       ``(5) Coordination with subsection (b).--Subsection (b) 
     shall apply after the application of this subsection.
       ``(e) Limitation on Minority Discounts.--For purposes of 
     this chapter and chapter 12, in the case of the transfer of 
     any interest in an entity other than an interest which is 
     actively traded (within the meaning of section 1092), no 
     discount shall be allowed by reason of the fact that the 
     transferee does not have control of such entity if the 
     transferee and members of the family (as defined in section 
     2032A(e)(2)) of the transferee have control of such 
     entity.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transfers after the date of the enactment of 
     this Act.

  Mr. CONRAD. Mr. President, I have already described what my amendment 
does. I will use the first part of my time to answer the very creative 
arguments made by my colleagues on the other side. I have never heard 
such imaginative arguments on the Senate floor. This is really 
intriguing.
  They start out by justifying eliminating the estate tax by an attack 
on the farm bill, saying the farm bill was over the budget and, 
therefore, what does it matter if we take another $700 billion out of 
Social Security in order to eliminate the estate tax. How soon they 
have forgotten their own votes. They voted for the farm bill budget 
which they decry. Yes, they did. The

[[Page S5347]]

farm bill budget was provided for in the last budget resolution.
  Our colleagues on the other side of the aisle voted aye. They voted 
for the Republican budget resolution. The Republican budget resolution 
passed on the floor of the Senate was their resolution. Their 
colleagues in the House passed exactly the same budget resolution. Do 
you know what else? Their President proposed a budget with exactly that 
amount of money in it for the farm bill.
  I hate to rain on their parade, but they supported the Republican 
budget resolution that funded the farm bill. That was their budget 
resolution. That was their proposal. They voted for it. Now they come 
out here and attack it. They should have been here voting against their 
own budget resolution because that is what provided the budget for the 
new farm bill.
  The Senator from Texas talks about the bill that just passed that was 
requested by the President. He has attacked the supplemental 
appropriations bill that was requested by the President. The difference 
between what we passed here, which he attacks, and what the House of 
Representatives passed, according to the Congressional Budget Office, 
is $1.3 billion, not the $10 billion to which he referred. The $10 
billion he referred to is an absolute myth. There is $1.3 billion of 
difference between what the Senate passed and the House passed.
  By the way, the President praised what the House passed and condemned 
what the Senate passed. In a $30 billion bill, there was only $1 
billion difference. Where is the difference? The Senate bill has more 
money for first responders, the policemen and the firemen we expect to 
protect this Nation, a $600 million difference there. There was $300 
million more in the Senate bill than the House bill to protect our 
nuclear facilities.
  Has anybody read the paper the last few days? Of what did the 
administration warn us? They warned us of a ``dirty'' bomb attack on 
the Capitol of the United States. What is a ``dirty'' bomb? It is a 
regular bomb with nuclear fissile material around it. Do you know what 
would happen if that kind of bomb were dropped in the vicinity of the 
Capitol? The former Vice Chairman of the Joint Chiefs of Staff, Admiral 
Owens, told me in a breakfast just 2 weeks ago, it would make the 
Capitol area uninhabitable in a mile circumference for 400 years.
  From where might that nuclear fissile material come? It might come 
from our own labs. That is why the Senate added $300 million to protect 
our nuclear facilities and added $650 million for our first 
responders--our policemen and firemen--and added another $700 million 
to protect our ports, because one of the things we know is that nuclear 
fissile material might come into this country everyday in thousands of 
containers. And only 2 percent are checked.

  So is this some big, wasteful spending program to protect our nuclear 
facilities, to protect our ports and to provide funding to our first 
responders? I don't think so. That is the difference between the House 
bill the President praised and the Senate bill that the President 
attacked. There is no $10 billion difference. That is total fiction.
  Let's go back to the question of the fundamental issue before us. Is 
spending a threat to our fiscal future? Absolutely. But our fiscal 
future is determined not just by spending, but by the relationship 
between spending and revenue. Deficits are created by an imbalance 
between spending and revenue. You only have deficits when you spend 
more than your income.
  We know the circumstance we face as a nation. It has become 
abundantly clear to all of us. We face a circumstance in which we see 
in our future an ocean of red ink. Here it is. We go back to 1992 on 
this chart. We were facing deficits, not counting Social Security, of 
$341 billion. In 1993, we passed a 5-year plan that started lifting us 
out of deficit.
  By the way, not one of our friends on the other side voted for it. It 
was the plan that started lifting us out of deficit.
  Each year, we were coming out of deficit. Then in 1997, on a 
bipartisan basis, we passed a plan that finished the job. We actually 
got back into surplus. We were there for 3 years, and then we got 
plunged back into the deficit hole by the events of last year: No. 1, 
the tax cut advocated by our friends on the other side; No. 2, the 
attack on this country; No. 3, the economic slowdown.
  When you wonder where the surpluses went, here is what we find: 42 
percent went to the tax cuts that were passed last year; 23 percent 
went to the economic slowdown; 18 percent went to the increased costs 
of the attack on our country; 17 percent are due to technical changes, 
mostly underestimations of the cost of Medicare and Medicaid.
  We have before us a fundamental question: How are we going to deal 
with this ocean of red ink? Our friends on the other side say: Well, 
let's keep digging the hole deeper. It doesn't matter. We were for 
eliminating the estate tax last year, and we are still for it. It 
doesn't matter that the surpluses have evaporated. It doesn't matter 
that the money is all gone. We are going to stay steady on this 
course--even if the course leads to insolvency. It doesn't matter that 
just a few hours ago this Chamber voted to increase the debt of the 
United States by $450 billion.
  That is after the President and our friends on the other side 
promised us last year that they had a financial plan that was going to 
lead to the maximum paydown of our debt. That is what they said a year 
ago. They had a plan that would lead to the maximum paydown of the 
debt. Now they have asked for the second biggest increase in the debt 
in our Nation's history. They told us a year ago that we would have 
surpluses of $5.6 trillion in the next decade. Now the money is all 
gone. Instead of surpluses, there are deficits. That is the hard 
reality.
  So the question before us is, what do we do about the estate tax? Let 
me stipulate that they have one part of this argument right. We need to 
change the estate tax. We should not leave it the way it is. We should 
not let it hit people with a million dollars of assets. We ought to 
increase it. That is what my proposal does. My proposal goes to $3 
million next year, $6 million for a couple. You don't have to wait 
until 2007, as you do under their proposal. We go to $3 million for an 
individual and $6 million for a couple next year. You don't have to pay 
a penny of estate tax. In 2009, we go to $3.9 million.

  On their side, they talk about how much they care about helping 
people. But they want to wait. They want to wait. I don't want to wait. 
I want to go to $3 million for an individual, $6 million for a couple 
next year. Give them the estate tax relief they deserve. Don't 
eliminate it. Don't say to the wealthiest among us--the super wealthy--
you don't ever have to face any estate tax. Why? Because it costs too 
much, Mr. President. Their proposal costs $99 billion--$99 billion in 
this decade.
  The proposal I am making costs $12.6 billion in this decade. So it 
seems to me it is a pretty good proposal. No. 1, it gives immediate and 
substantial relief to estates by going from a million dollars of 
exemption to $3 million for an individual, $6 million a couple, not in 
2007 or in 2008, but next year. No. 2, it costs a lot less because you 
don't eliminate the estate tax, you reform it. Their plan costs $99.4 
billion. Mine costs $12.6 billion.
  Mine includes a stepped-up basis rather than a carryover basis. I 
know that is confusing and I know those are words most people don't 
use. What it means is simply this: Under my plan, you will pay future 
taxes based on the value of the assets you inherit at the time you 
inherit them. You will not be paying taxes based on what grandpa paid 
for the asset you inherited. Think of the difference. Not only is that 
a big tax difference, that is a big difference in terms of practicality 
and simplification.
  We tried what they are proposing, this idea of carryover basis, this 
idea that you are going to go back to the value of what grandpa paid 
for the farm, of what grandpa paid for the stock, of what grandpa paid 
for the real estate. Do you know what we found? Most people don't even 
have the records. Most people don't even know what grandpa paid. Most 
people don't have any idea, and they can't find out because it happened 
30 or 40 or 50 years ago. We tried this. We tried what they are 
proposing. It was an administrative disaster, an administrative 
nightmare.
  We will hear the other side saying that these assets have already 
been

[[Page S5348]]

taxed. The fact is, an analysis has been done. The vast majority of 
these assets have never been taxed. Yet they say it is double-dipping. 
Most of these cases are assets that have never been taxed. I believe 
the proposal that----
  Mr. KYL. Will the Senator yield for a question on that?
  Mr. CONRAD. Yes.
  Mr. KYL. I am curious about the source of the statement that the 
majority of assets has never been taxed.
  Mr. CONRAD. Yes. I will get the Senator a copy of the analysis on 
that.
  Mr. KYL. I thank the Senator.
  Mr. CONRAD. The hard reality is that we have to make choices. We 
ought to reform the estate tax. We ought to increase the amount of 
exemption. We should not wait for 2007 and 2008. We ought to do it now.
  Under my proposal, we go to $3 million from $1 million today for an 
individual, $6 million for a couple. At the same time, it costs a lot 
less. That means we do protect Social Security. We do protect the 
financial structure of this Government. We are fiscally responsible.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Texas.
  Mr. GRAMM. Mr. President, how much time does the Senator from Alabama 
need?
  Mr. SESSIONS. Ten minutes.
  Mr. GRAMM. I yield 10 minutes to the Senator from Alabama.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I thank the Senator from Texas for his 
leadership on this issue and for yielding me time.
  One of the issues we need to recognize as we talk about a budget--and 
we have the distinguished chairman of the Budget Committee here--is we 
do not have a budget. One was proposed in the Budget Committee by the 
Democratic members. It was brought up, voted on, and got zero votes. 
The reason is that there is not sufficient discipline to make tough 
choices in this body, and the budget that was proposed had no political 
support, did not balance, and did not make sense.
  We are in trouble with spending. When the President proposes an $18 
billion emergency spending bill and this Senate adds $14 billion more 
to it for special projects that I do not believe are necessary, and, in 
fact, I think the President's supplemental was generous, we are losing 
discipline on spending.
  The reason we had a surplus from 1994 to 1998 is we had almost no 
increase in spending in this body. We kept our spending flat on 
discretionary spending. It resulted in tremendous gains in balancing 
the budget.
  It is time for us to deal with this estate/death tax. In 2000, we 
voted to eliminate it. It phases out at the end of 10 years, in 2010. 
People do not like it. It is unfair. It disrupts the American economy. 
To have the Federal Government reach in at the time of death of a 
family member and take out 55 percent of what that family has 
accumulated is a confiscation. It is an absolute decimation of a 
family's life and savings.
  I had an individual tell me about their grandfather. Everybody was 
home for Christmas. It was just after Ronald Reagan had pushed through 
a modification of the estate tax. It would have saved his family a 
little money. The grandfather was there at Christmas. The cancer was 
taking its toll on him. Every day, he asked what day it was. She told 
me: My grandfather died at 10 a.m. on January 1. His last act was to do 
what he could to keep the taxman from taking away what he had earned 
and preserve it for his family.
  I think this is a big deal. It touches a lot of people. Some people 
say: Oh, it is huge revenue, we cannot afford it. It is only 1 percent 
of the total income into this Government at best. That is something we 
certainly can afford to eliminate.
  No tax causes more gyrations, more lawyers, more accountants, CPAs, 
appraisers, and strategists to try to beat this tax than does the death 
tax.
  In addition to that, the Federal Government spends more on trying to 
collect the tax than on any other tax. For the 1 percent we get, we are 
getting the heaviest cost on the economy, the heaviest cost on the 
Government to collect them. I think it is very unwise. It causes 
extraordinary stress on the elderly.
  Sit down, as I have done as a practicing lawyer, and talk with a 
family about the tough decisions they may have to make. Do they want to 
create a trust? Do they want to advance gift money to children to try 
to reduce the impact of this tax? This is forcing the elderly to make 
decisions they ought not have to make. It upsets them, makes them 
nervous, and causes them to make uneconomic decisions that reduce 
oftentimes the productivity and efficiencies of their corporations and 
businesses.
  It is, in my view, a huge nightmare to collect. Much of the dispute 
is in litigation over appraised values of properties. Many of these 
issues are just really a nightmare for the elderly.
  Let me share with my colleagues briefly what I think is the most 
pernicious part of this tax. My good friend's proposal to raise the 
exemption to $3 million really will not touch it. These are the 
growing, vibrant, midsize, local, home-based companies that are doing 
well.
  I know of a company that had 27 automobile parts stores. They built 
up from one. They had headquarters in Alabama. One of the members dies, 
and then what do they do? They meet, have a discussion, and the net 
result is that this locally owned company, competing with some of the 
biggest parts companies in America, sells out to Carquest. I have 
nothing against Carquest, but that is a national company, maybe even an 
international company in scope, moving millions and millions of dollars 
a year in parts. As a former parts person myself and a former equipment 
dealer, I have some empathy for them.
  I will just say this: Carquest, as a major national company, a 
broadly held stock company, never pays the death tax. It is never 
impacted by a death tax. But a closely held corporation is savaged by 
the death tax.
  It reminds me of a situation in which there are some trees growing 
up. There are some big trees and there are some little trees growing. 
They are trying to compete with the big trees to get more sunlight and 
develop and expand and compete with the big trees, and somebody comes 
along with the clippers and clips the tops off them, making it 
impossible for them to compete.
  If my colleagues want to know why in America today we see a collapse 
of local companies, why we see an unusual conglomeration of wealth in 
the big stock companies, the reason is they do not pay this tax. This 
is a tax that falls only on the small companies in a way that 
devastates them too often.
  I am concerned about that situation. I ask you: Do GM, GE, 
DaimlerChrysler, Toyota, or Mitsubishi pay a death tax? No, they do 
not. But I can take you back to the small bank in my hometown, the 
small manufacturing company, or the small chain of auto parts stores. I 
can tell you about a young man who told me that he and his father and 
brother owned four motels in Alabama. They would like to see their 
business expand. He explained to me that he, his brother, and his 
father were paying $5,000 a month for a life insurance policy on their 
father's life so they could pay the estate tax in case he died. 
Otherwise, they would have to take the money out of their company--and 
they had no money to take out of the company; they were pouring their 
money into the company--they would be forced to sell off maybe to a 
Holiday Inn, maybe to a Ramada, or some big company that does not pay 
the death tax.
  We need to quit nickel-and-diming this issue. We have voted to 
eliminate this despicable, unfair, abusive tax that eliminates and 
weakens competition in America. It brings in little revenue at 
extraordinary cost to the tax collector and to the American people who 
have to pay it. It is long overdue to get rid of it. Let's not back up 
now. Let's go forward. Let's not let those who want more money to 
spend, spend, spend, spend, and keep us from doing the right thing.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Mr. President, the time is controlled by the Senator from 
North Dakota. I wonder if the Senator will yield me time to talk about 
some of the statements I heard this afternoon.
  Mr. CONRAD. I will be happy to do that. Maybe I will take a minute.
  Mr. REID. Fine.

[[Page S5349]]

  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, we have heard a lot from the other side 
about spending running away.
  If we examine the budget before us, all of the increase is in two 
areas: defense and homeland security. Both sides of the aisle have 
supported those increases. The President proposed major increases in 
defense spending after the attack on this country. Those of us on our 
side of the aisle immediately agreed. The President proposed major 
increases in homeland security. Those on our side of the aisle 
immediately agreed.
  There are big increases in spending, but every part of that increase 
is in those two areas of defense and homeland security. That is where 
the big increases are occurring, and I think it is understandable why 
we have big increases in defense proposed by the President and agreed 
to by our side of the aisle. I think it is very easily understood why 
we have a big increase in homeland security proposed by the President 
and agreed to by our side of the aisle.
  Mr. REID. Will the Senator yield for a question?
  Mr. CONRAD. Yes, I would be happy to yield.
  Mr. REID. I have said publicly and, of course, privately that I think 
the Senator from North Dakota really has a grasp on numbers. The 
Senator is aware, is he not, that about a year ago at this time, it was 
approximately a $4.7 trillion surplus over 10 years? The Senator would 
agree now that that basically is gone; is not that right?
  Mr. CONRAD. Yes. Actually, the Senator will recall, we were told a 
year ago that we were going to have $5.6 trillion of surpluses over the 
next decade. That is what we were told a year ago, January of 2001, 
$5.6 trillion of surpluses.
  Now when we look at the President's budget proposal, plus the 
shortfall in revenue in this filing season, plus the stimulus bill that 
has been passed, there are no surpluses, none. Remember, about half of 
this money was Social Security money. In other words, $2.5 billion of 
this amount of surpluses is Social Security money. It is all being used 
for other purposes now.
  When the Senator from Arizona says it does not matter about the 
estate tax and Social Security because estate tax money is not used for 
Social Security, the point he misses is when money is taken out of the 
revenue stream, and there already is not enough to meet the obligations 
and now even more money is taken, something has to give. What is the 
one place that is left to give?
  Mr. REID. Social Security.
  Mr. CONRAD. The Social Security trust fund. So he can say there is no 
connection, but there is a very direct connection. There is a very real 
connection. The only place there is any money is the Social Security 
trust fund. So if he takes a big chunk more of revenue, how is it going 
to get covered?
  Mr. REID. Will the Senator answer another question?
  Mr. CONRAD. I would be happy to.
  Mr. REID. The tax cuts that were passed in this body also had some 
impact on the future financial security of this country. Is that a fair 
statement?
  Mr. CONRAD. There is no question about it. If we look at, where did 
all the money go, here is where it went. Our friends on the other side 
like to say it all went to spending. No, no, no. Forty-two percent went 
to the tax cut. That is the biggest reason for the disappearance of the 
surplus. The second biggest reason is economic changes. That is the 
economic slowdown. That is the second biggest reason. The third biggest 
reason is spending, and virtually all of it is defense and homeland 
security.
  The final reason was underestimations of the cost of Medicare and 
Medicaid. That is where the money went.

  Mr. REID. I would like to ask the Senator another question or two. Is 
that appropriate?
  Mr. CONRAD. Sure.
  Mr. REID. We passed Friday, about 1 a.m., a supplemental 
appropriations bill. I have heard statements all day from the other 
side of the aisle about this supplemental appropriation and how it 
contains big spending. I direct the Senator's attention to a number of 
items. First, I ask the Senator from North Dakota, the chairman of the 
Budget Committee, he realizes, does he not, that there was $14 billion 
in that bill for defense? Is the Senator aware of that?
  Mr. CONRAD. That is correct. Of the $31 billion, $14 billion was for 
defense.
  Mr. REID. That was requested by the President; is that true?
  Mr. CONRAD. That is correct.
  Mr. REID. The Senator is aware also that there was approximately $5.5 
billion requested by the President for homeland security efforts; is 
that true?
  Mr. CONRAD. That is correct.
  Mr. REID. The Senator is also aware that Senator Byrd and Senator 
Stevens held hearings over a period of 3 weeks that included seven 
Cabinet officers and scores of other witnesses to find out what was 
needed for homeland security for this next fiscal year. Is the Senator 
aware of that?
  Mr. CONRAD. I am.
  Mr. REID. After having done that on a bipartisan basis, unanimously 
out of the Committee on Appropriations, is the Senator aware that 
figure was increased by about $3 billion?
  Mr. CONRAD. That is correct.
  Mr. REID. Is it not true, I say to my friend, that of those moneys 
that were increased, there was a billion for first responder programs? 
I say to my friend, I heard on public radio this morning a long piece 
on how State and local government is being killed financially because 
of the responsibilities they have for providing security for their 
people, and these are responsibilities they believe that the Federal 
Government should bear. They gave an example of a place in Florida. 
Tomorrow I think they said they are going to go to Orange County, CA, 
and indicate how these entities are being decimated financially as a 
result of their requirements, these unfunded mandates that we have 
passed on to them. Is the Senator aware of that?
  Mr. CONRAD. I am. I say to my colleague, I looked at the increases 
because, frankly, there were parts of that bill that I did not support. 
I voted against a number of the provisions in that bill. If one is fair 
and objective about what was offered, where did the increases occur?
  According to the Congressional Budget Office, the difference between 
the Senate-passed bill and the House-passed bill is $1.4 billion, not 
the $10 billion that is being discussed on the other side; $1.4 billion 
of differences between the House bill and the Senate bill when scored 
consistently by the Congressional Budget Office. Where were the 
differences? First responders, $600 million more in the Senate bill; 
nuclear facilities, $300 million more to protect our nuclear 
facilities; port security, $700 million more.
  If anybody has been reading the newspapers, they know there is a 
tremendous vulnerability of the United States to a so-called ``dirty'' 
bomb that would make this Capital uninhabitable for 400 years. I do not 
think it is unreasonable to say we are going to protect the nuclear 
facilities where that fissile material might come from, that we are 
going to protect the ports of America where those threats could come in 
to America.
  Another $250 million was added for airport security to protect 
against these materials coming into the airports of the country in the 
holds of planes.
  I say to my colleagues, that is spending that was designed to protect 
America.
  Mr. REID. Will the Senator also acknowledge that there has been in 
this bill that we passed in the Senate last Friday morning $387 billion 
for bioterrorism, including to improve lab capacity at our Centers for 
Disease Control and the National Institutes of Health? Does the Senator 
from North Dakota acknowledge the importance of studying bioterrorism 
after the anthrax that closed down a major office building for 3 months 
in the Senate?
  Mr. CONRAD. It not only closed down a major office building in the 
Senate but closed down post offices and closed down businesses.
  Mr. REID. And killed people.
  Mr. CONRAD. Killed people.
  Now that we know a significant part of the planning by the al-Qaida 
network is bioterrorism, we know that a significant part of the 
planning of the al-Qaida network is a ``dirty'' nuclear device to be 
dropped on this Nation's

[[Page S5350]]

Capital, we cannot choose to turn our backs and not worry about 
defending the country.
  Our first obligation as United States Senators is to defend this 
Nation.
  Mr. REID. Would the Senator acknowledge there is $200 million in this 
bill that the President requested based on hearings held by Senators 
Byrd and Stevens for food safety, including food inspectors, 
laboratories, protections against animal and plant disease, and also to 
assess risks to rural water systems; and also aware there is $154 
million for cyber-security, there is also $100 million for the 
Environmental Protection Agency to look at assessments of water system 
security?
  We have people quibbling, and I say ``quibbling'' because I cannot 
find another word to describe what they are talking about this 
afternoon. The Senator has shown in graphic form billions of dollars 
taken away from the American people and given to a very small 
percentage of the people. Less than 1 percent of the American 
taxpayers, 42 percent, is gone because of that; is that right?
  Mr. CONRAD. Yes.
  Mr. REID. I don't mean to denigrate, but I cannot come up with 
another word other than ``quibbling.'' We are talking about billions of 
dollars that is gone--like that--and here we are talking about programs 
that Senators Byrd and Stevens worked on for weeks, that passed in the 
Senate without any problem at all because it was good for homeland 
security, good for the people of my State, good for the people of your 
State, and as I heard on Public Radio this morning, good for the people 
of Florida and even Orange County, CA, which has been devastated. I 
might mention, Orange County, CA, is a very rich county, but they have 
been devastated by virtually unfunded mandates that we passed on them 
since September 11.
  Mr. CONRAD. I ask my colleague, are there times when money is spent 
inappropriately? Absolutely. Do we need to restrain spending? 
Absolutely.
  Under the budget proposal I made to my colleagues, we would take 
spending to the lowest level since 1966. I applaud the Senator from 
Texas and the Senator from Arizona for saying we have to restrain 
spending. There is no way out of this hole that has been dug except to 
look at both sides of the equation--spending and revenue.
  To eliminate the estate tax that costs $99 billion under their 
proposal, when instead we could reform the estate tax and increase the 
exemption to $3 million for an individual, $6 million for a couple, at 
a cost of one-eighth as much, a cost of $12.5 billion instead of $99 
billion, makes no earthly sense to me. I hope we think carefully about 
these votes and what it means for the financial future of the country.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. CONRAD. How much time do I have?
  The PRESIDING OFFICER. Thirty-one and a half minutes.
  Mr. CONRAD. I am happy to yield to the Senator from West Virginia, 15 
minutes.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. BYRD. I thank the distinguished Senator from North Dakota.
  Mr. President, I understand there is a little bit of grousing and 
gnashing of teeth concerning the moneys that were appropriated for 
homeland security in the supplemental appropriations bill last week. 
Let us stop, look, and listen.
  In the last several hours, the threats against this Nation from 
terrorist attack once again were made evident with the arrest of an 
American citizen who apparently has been working with the ``al-Qaida'' 
terrorist network, plotting an attack on the nation's capital.
  Once again, our eyes have been opened to the fact that terrorists 
live among us. The threats are real. The danger is present. We should 
not continue to delay actions that will fund immediate steps to protect 
American lives from attack.
  Soon, the supplemental bill, which is being criticized by some today, 
will be in conference. I will fight hard for the $8.3 billion homeland 
security package that this Senate overwhelmingly approved last week. I 
hope that President Bush will match his rhetoric on homeland security 
with support for a funding package that meets so many of the critical 
security shortfalls in this country.
  The announcement about yesterday's arrest only amplifies the concerns 
raised by administration officials within the past few weeks. The Vice 
President warned that a strike is ``almost certain.'' Secretary of 
Defense Donald Rumsfeld has stated that it is inevitable that 
terrorists will acquire weapons of mass destruction. Secretary of State 
Colin Powell has warned that ``terrorists are trying every way they 
can'' to get nuclear, chemical or biological weapons. And Homeland 
Security Director Tom Ridge said, ``While we prepare for another 
terrorist attack, we need to understand that it is not a question of 
if, but a question of when.''
  Clearly, we know that the threat exists. We know that terrorists plan 
to strike. We do not know where or how or when, but we know that they 
will strike again. The question remains, will we be prepared?
  Last week, the Senate took steps to address the many gaps in our 
homeland security network. By a vote of 71 to 22, the Senate voted very 
clearly to provide critical resources to protect American lives and to 
try to prevent future tragedies like the one we witnessed last 
September. Unfortunately, despite all of its rhetoric that homeland 
security is a top priority, the administration continues to oppose this 
critical legislation. In fact, the administration has gone so far as to 
threaten to veto the bill.
  The President today travels to a water treatment plant in Kansas 
City, MO, to showcase a piece of his proposed Department of Homeland 
Security. This piece would create a threat analysis unit, envisioned as 
part of Mr. Bush's proposed intelligence-analyzing division, that would 
study the vulnerabilities of critical infrastructure such as water, 
road, and financial systems.
  The supplemental bill approved by the Senate and currently opposed by 
the Bush Administration would put us several steps ahead on this threat 
assessment.
  During Senate Appropriations Committee hearings over the last several 
weeks, Senators learned that more than $400 million is needed for local 
governments to conduct vulnerability assessments for our water systems. 
The supplemental bill includes $125 million for cities to assess the 
vulnerabilities of their water systems and for vulnerability 
assessments and security improvements to protect rural water systems. 
The administration did not request funding to help secure our drinking 
water systems, and it is opposing the Senate-passed supplemental bill 
that does make appropriations for our drinking water.
  This spring, the Department of Energy sent the Office of Management 
and Budget a request for additional funds to secure America's nuclear 
weapons complex and labs, but the request was turned down. Now the 
administration has lauded its arrest of one man linked to a ``dirty 
bomb'' plot. But instead of supporting funds to better secure our 
nuclear labs and material, the administration is opposing the Senate 
supplemental bill that contains $200 million for that very purpose.
  While in Kansas City today, the President is also expected to trumpet 
his plans to address vulnerabilities within the nation's financial 
systems. A cyber attack is a real possibility. As Senator Bennett has 
pointed out, ``In the cyber-age, many of the attitudes we have had 
about warfare, about vulnerability, about opportunity have to be 
thought through entirely differently.'' Instead of supporting our 
efforts to address this threat, the President is opposing the Senate-
passed supplemental bill that includes $154 million for cybersecurity 
to help combat the threat to Federal and private information systems.
  Today, the President will talk about his support for local 
communities in the overall homeland security effort. A major part of 
that local effort is the actions of first responders, namely, local 
police officers, firefighters, emergency medical teams. The Federal 
Emergency Management Agency received $3 billion worth of applications 
from local firefighters for new equipment and training, but FEMA only 
had $360 million to meet the request. The administration did not ask 
for any additional funds in its supplemental bill. But the Senate-
passed legislation last

[[Page S5351]]

week does include $300 million to continue to meet this massive gap in 
our homeland security network.

  Last week, the President announced a massive governmental 
reorganization to respond to terrorist threats. I support the concept 
of a Department of Homeland Security, as do most Members of this 
Congress, I believe, but there are many details to be worked out and 
many questions to be answered. We should not wait to address the gaps 
in our Nation's defenses while this new department is crafted. 
Terrorists will not swear off further violence until a new department 
is up and running. We should not delay our efforts to thwart that 
attack. The appropriations bill the Senate passed last week with a huge 
margin will do just that.
  It is time for the administration's rhetoric on homeland security to 
be matched by action. It is time for the administration to recognize 
that simply talking about homeland security will not save lives. It is 
time for the administration to support investments in homeland 
security, to support the Senate's work to save lives, and to help fill 
the gaps that currently exist in our Nation's homeland security 
network. The administration should support the supplemental 
appropriations bill passed by the Senate last week, and I hope the 
President will speak to that end.
  I was down at the White House this morning, and I urged the President 
to support the supplemental appropriations bill that the Senate passed 
last week. This bill will go a long way toward matching the rhetoric by 
the administration.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. WELLSTONE. I say to my colleague, Senator Conrad was going to 
yield me 10 minutes.
  Mr. GRAMM. I can do it either way. I was going to speak, but if the 
Senator has a time constraint, I am happy to step aside for 10 minutes.
  Mr. WELLSTONE. If my colleague would be willing to do so, that would 
help me.
  Mr. GRAMM. I will be glad to do so. Let my colleague speak.
  Mr. REID. How much time does the Senator from Minnesota desire?
  Mr. WELLSTONE. Ten minutes. I will take more time tomorrow.
  Mr. REID. Senator Conrad has how much time remaining?
  The PRESIDING OFFICER. There remain 22.5 minutes.
  Mr. REID. On behalf of Senator Conrad, I yield 10 minutes to the 
Senator from Minnesota.
  Mr. WELLSTONE. Mr. President, I strongly oppose the full repeal of 
the estate tax for multimillionaires and billionaires. It is unfair, 
and it is unaffordable. Let's repeal it for small businesses. Let's 
repeal it for family farmers. We all agree on that. Let's go with the 
Conrad formula of $3 million individual, $6 million a couple, up to $7 
million, but let's retain some modicum of fiscal sanity before we give 
away nearly $1 trillion in tax cuts to a handful of the ultrarich. That 
is what this is.
  The timing could not be more ironic. We now immediately follow a vote 
to increase the Federal debt limit by $450 billion. That was to borrow 
another $450 billion, which is only enough credit to last until next 
March.
  Many of my colleagues voted for the tax cuts last year but they 
opposed increasing the debt limit; that is to say, in the words of the 
old Yiddish proverb, dancing at two weddings at the same time, although 
I don't think you should be able to do so.
  It is now clear that the claims that have been made by the White 
House, by the President, and by too many Senators and Representatives, 
that we can have massive tax cuts for the wealthy--Robin Hood in 
reverse--with most of the breaks going to the top 1 percent, pay down 
the debt, and invest in critical public priorities, were completely 
false.
  Of course, there is plenty of that to go around. Colleagues were out 
here advocating nearly a $1 trillion tax cut for billionaires less than 
a week after there was so much heartburn on the Senate floor over an 
extra $1 billion for homeland security. Where did the fiscal 
conservatives go? They will spend $1 trillion to protect some wealthy 
kid's inheritance, but they will not spend $1 billion to protect our 
cities and towns from terrorists.
  Spend $1 trillion to protect some wealthy kid's inheritance but not 
$400 million for veterans' health care, with so many veterans falling 
between the cracks.
  Give away almost $1 trillion over the next 20 years, erode the 
revenue base--it is fine to do it for billionaires and 
multimillionaires, but we don't have enough money for education, not 
for smaller class size, not to recruit and retain good teachers, not to 
have good, affordable prescription drugs, not to do something about 
deplorable conditions in nursing homes, not to help elderly people stay 
at home, live at home in as near normal circumstances as possible with 
dignity, not to expand health care coverage. We will not have any of 
the money to do that.
  Full repeal of the estate tax would cost $104 billion over the next 
10 years, literally to protect a few thousand ultrawealthy families. 
Even worse, from 2013 to 2020 it is going to cost the taxpayers over 
$800 billion to provide this ``relief.'' This means that the full cost 
of this effort to have full repeal of the estate tax over 20 years is 
nearly $1 trillion.
  Nationally, only 1.6 percent of all estates were made up with 
significant small business assets and only 1.4 percent had significant 
farm assets. This means that virtually all the estate tax is paid by 
extremely wealthy people who do not own farms or small businesses. The 
Conrad amendment really targets this.
  In contrast, many rely on Social Security. Over 740,000 Minnesotans 
currently receive Social Security. Make no bones about it, what we are 
going to be doing here is not only not providing the investment in 
education or health care or affordable housing, but in addition we are 
just going to basically be taking it out of the Social Security trust 
fund. That is what this is all about.

  For helping multibillionaires and billionaires, refusing to target 
this--which is what the Conrad amendment does--refusing to exclude 
small businesses and family farms that are handed from family to 
family--which is exactly what the Dorgan amendment does--instead, we 
have this effort to erode the revenue base $1 trillion over 20 years, 
most of the benefits going to the wealthiest Americans. And at the same 
time, we will not even be able to live up to our commitment in Social 
Security.
  I believe this is really a proposal which defies common sense. If we 
want to do it the right way, we cap the estate tax exemption at a 
reasonable level. That is what the Conrad amendment does. If we want to 
do it the right way, we exempt, as I said before, family farms and 
family-owned businesses. If we want to do it the right way, we will 
have some balance.
  I finish on this note. I do not fault my colleagues because I think 
for many of them, this is their position. If you believe that when it 
comes to the most pressing issues of people's lives--be it to make sure 
Social Security benefits are there, to make sure we adequately fund 
Medicare reimbursement for our hospitals and nursing homes and home 
health care providers, to make sure people can afford prescription 
drugs, to make sure we live up to our commitment to get the dollars 
back to our schools and our school districts, our teachers, our 
children, our young people from prekindergarten through higher 
education, to make sure something is done about the lack of affordable 
housing, to make sure we can provide some help for people who have no 
health care coverage, to make sure we can provide some help for small 
businesses that can't afford health care costs--if you believe, when it 
comes to those pressing issues, there is nothing the Government can or 
should do--and I believe that in some ways that is the ideological 
position some of my colleagues take--then eliminating the estate tax, 
not targeting it, is the perfect way to go.
  It is win-win. You help the millionaires and the multimillionaires 
and the billionaires, you erode the revenue base, and you make it 
impossible for the Senate and the House of Representatives and the 
Federal Government to play a positive role in helping people. You make 
it impossible for the Federal Government to play a positive role in 
dealing with some of the most pressing issues of the lives of people we 
represent.

[[Page S5352]]

  That is what this estate tax cut does. That is what this proposal to 
completely eliminate the estate tax accomplishes.
  In one broad stroke of public policy, you have Robin Hood in extreme 
reverse with the benefits going to the wealthiest Americans, and at the 
same time you make it impossible for us to make the investments in 
health care, in education, in affordable housing, in Social Security, 
and in Medicare.
  From the point of view of some of my colleagues, it is win-win. From 
my point of view, it is lose-lose.
  I hope our colleagues will support the Conrad amendment as at least a 
commonsense, reasonable alternative.
  I am not sure my colleague from Texas fully agrees with my statement, 
but I appreciate his graciousness.
  Mr. GRAMM. Mr. President, I first wish to say something that I 
consider to be positive about our colleague from Minnesota. There are 
many people who want to take the repeal of the death tax back, but they 
do not want to own up to why they want to do it. They want to do it 
because they want to spend the money. The one thing I have always 
admired about the Senator from Minnesota is that he does not dilute his 
liberalism with the alloy of hypocrisy. He says exactly what he 
believes. I think in doing so he not only is true to his conscience but 
he does the Senate a service by defining exactly what all of this is 
about.
  I wish to yield myself 20 minutes of the remaining 50 minutes we 
have.
  Let me begin by saying that I think I am a good person to be a leader 
on this issue in the sense that the only thing I have ever been 
bequeathed in my life is that my grandmomma's brother, my great-uncle 
Bill--who was a great checkers player and I guess in the minds of the 
world since he worked in a cotton mill he may not have been a very 
important person, but he was an important person to me--but he 
bequeathed to me a cardboard suitcase full of yellow sports clips from 
the 1950s. I have often thought that had it been baseball cards I would 
be a rich man today. So I will never pay a death tax. I hope someday my 
children and grandchildren will have enough wealth that it would be an 
issue if we don't repeal it. But I am against the death tax because it 
is profoundly wrong.
  I know it is easy to envy what another family achieves. But how can 
it be right? I am not talking about budgets, I am not talking about 
dollars, I am talking about right and wrong. People may work a 
lifetime, they scrimp, they save, they sacrifice, they plow back into 
their business, they work 12 and 14 hours a day, they accumulate, they 
build, and they build America while they are building. How can it be 
right simply because we are greedy and we want their money to make 
their children sell off the fruits of their life's work to give the 
Government a 55-percent share of everything they have accumulated 
during their lifetime simply because they have been successful?

  It is a question of right and wrong. I will say about the 
constituents of my State--I can't speak for any other State in the 
Union--but in my State when I am talking about this issue--whether I am 
talking to farmhands, or railroad retirees, or rich people in North 
Dallas--when I talk about it being wrong to make a man or a woman sell 
off the life's work of their parents to give the Government a double 
taxation, people stand up and applaud because they are against it. They 
are flat against it because it is wrong and because it is un-American. 
It is un-American to do that. By doing it, we prevent accumulation.
  I would like to refer to two thick studies. I would put them in the 
Congressional Record, except it would cost a lot of money. So let me 
refer to them so if people want them they can get them off the 
Internet. I will save probably $25,000 by not putting these in the 
Record.
  There was a study by the Joint Economic Committee, entitled ``The 
Economics Of The Estate Tax.'' It was published in December of 1998 by 
the Joint Economic Committee.
  All of their analyses and numbers boil down to the conclusion that 
the death tax has reduced by $500 billion the capital stock and the 
total investment that the Nation has made in job creation. They 
conclude that we are not raising net revenues by forcing people to 
destroy small businesses, destroy family farms, and to tear up the 
bequeath of Americans who have been successful. They argue that it 
destroys capital and that actually we are not collecting net revenue. I 
commend this to my colleagues.
  The second study is a private study that was done by the Institute 
for Policy Innovation, entitled ``The Case For Burying The Estate 
Tax.''
  They conclude that there are costs to collecting the estate tax. 
There is a decline in economic efficiency as people sell off their 
business because they do not want their children to have to deal with 
the estate tax problem. People buy insurance with money they could be 
investing in their business, and they do that to try to avoid the 
estate tax. When you look at all those costs, the Institute for Policy 
Innovation concludes that on net we are not even collecting any taxes 
with the death tax.
  Finally, even if you accept the IRS data as net data--in other words, 
that we are really losing revenue--when you take into account what it 
costs to collect the tax, what people spend trying to avoid it, and how 
it hurts the economy, contrary to all of the debate you have heard from 
the Democrat side of the aisle, we collected less than one cent out of 
every dollar of taxes collected in America last year from the death 
tax.
  Under the best of circumstances, we are not collecting very much 
money. Under more likely scenarios, we are not netting any money from 
the tax.
  This policy of death tax is driven by collective greed. It is not 
driven by economics. It makes no sense to make people sell off their 
business, or destroy their farm, or tear up their life's work. And it 
hurts the economy to do it. But we continue to do it because of this 
collective envy that somehow there is something wrong about people 
accumulating.
  Let me take the richest man in the world, Bill Gates. They say he is 
worth $46 billion. But because Bill Gates has $46 billion, I am richer. 
He changed the life of everybody on this planet with what he did in 
terms of information technology and the management of data. He created 
10 or 100 times that wealth from which we have all benefitted. He is 
giving over 90 percent of it away.
  You might say that is a lot of money. Many of our colleagues will 
say, let us take it, we can spend it. But what moral right do we have 
to take it? He has already paid taxes on every dollar of it. He is the 
largest taxpayer in the world. I am not doing this for Bill Gates, but 
he is the extreme example.
  The point is that this is not collecting very much money. 
Interestingly enough, one of the great paradoxes is the substitute that 
has been offered by Senator Conrad raises the deduction immediately to 
$3 million over the next 5 years and it would cost $20 billion.
  The way we phase out the repeal, our repeal over the next 5 years 
only costs $6.8 billion, and the real cost comes in the 10th year. The 
incredible paradox is the substitute that is being offered takes money 
out of the Treasury exactly when we don't have it, and it doesn't take 
money out in 2010 when we are going to have a surplus, according to the 
estimates of the Congressional Budget Office projection I have in front 
of me, of $653 billion.
  In other words, in trying to prevent us from making the repeal of the 
death tax permanent, the Senator from North Dakota offers a substitute 
that actually drives the deficit up in the next 5 years, whereas by 
phasing out the death tax, the real large cost of our phaseout does not 
occur until a year where we have about $600 billion of surplus. Why not 
give it back?
  The point is, we voted to repeal the death tax. We all celebrated it. 
We talked about it all over the country. Now we have a quirk in the 
budget where it comes back in 10 years. Did we mean to repeal it or 
didn't we? I believe we did. I believe we should.
  The second line of defense in all this is: But we don't have the 
money. We just don't have the money. We want to make the death tax 
repeal permanent, but we don't have the money.
  The only point I make, and I don't want to be unkind to anybody, but 
why is this argument about not having money never made when we are 
spending money? Why is it only made when we are letting people keep 
more of what they earn?

[[Page S5353]]

  I want to give you five examples. Whether it was good or whether it 
was bad--and my guess is some of it was good and some of it wasn't 
good--last Thursday we spent $14 billion more than the President 
requested on nonemergency items. That is four times the amount it would 
cost over the next 2 years to make the death tax repeal permanent. So 
if last Thursday we had enough money to spend $14 billion that the 
President did not request as an emergency, how come we don't have 
enough money to make the death tax permanent today?
  On the farm bill, I voted against the farm bill because I thought it 
was completely larded. I thought it was abusive in its spending. But 
how come we had enough money to spend next year on the farm bill that 
is seven times as much as it would cost next year to make the death tax 
repeal permanent? We had seven times as much money to spend 3 months 
ago when we passed that bill, but we don't have one-seventh that amount 
to be sure that people don't have to sell their farm when their dad 
dies?
  It is a matter of priorities. On the energy bill, we had more new tax 
cuts in that bill for the next year than it would cost to repeal the 
death tax.
  The trade bill contains new entitlements, and we had several times as 
much new spending in that bill that we passed last month as would be 
required to pay for repealing the death tax.
  In railroad retirement, we had 15 times as much in the first year as 
it would take to fund repealing the death tax.
  And finally, in the stimulus bill, in the amount we spent above the 
President's request, we could have funded repeal of the death tax over 
twice over.
  Here is my point: I am not saying that every one of these things was 
terrible and there weren't good things in them. I am just saying, here 
are five examples where we spent multiples of the amount of money that 
would be required this year for us to repeal the death tax. Nobody who 
today is saying we just don't have the money said that on any one of 
those five things I mentioned. I said it, I believe, on each and every 
one of them.
  The point is, the people who are saying we don't have enough money to 
make the repeal of the death tax permanent are the same people who 
voted to spend all this money.
  A final point on this issue: The Democrat budget that we voted on 
last week on the floor and not one Member of the Senate voted for--I 
guess every Democrat thought it didn't spend enough and every 
Republican thought it spent too much, but nobody voted for it--
increased spending on the discretionary account. I am not talking about 
national security items. I am not talking about defense. I am talking 
about $106 billion more than the President requested. That was more 
than enough to have funded the repeal of the death tax. The same people 
who thought we needed that $106 billion of spending now say we can't 
afford to repeal the death tax.

  It is a matter of priorities. Many of our colleagues can never afford 
to let working people keep more of what they earn, but they can always 
afford to spend the money. That is what this debate is about.
  It really boils down to this: First, we said we would repeal the 
death tax. It turns out it is coming back in 10 years. Should we make 
it permanent or not? Is it not wrong to force people to destroy the 
life work of their parents to give the Government 55 cents out of every 
dollar they have ever earned and accumulated even though they paid 
taxes on every penny of it?
  Second, are these programs that we want to spend money on so valuable 
that it is worth tearing up family farms and family businesses and the 
life's work of our people to pay for it? I don't think so.
  Finally, we have good, solid studies, including by our own Joint 
Economic Committee, that suggest we are not even collecting money on 
these taxes because they make the economy less efficient.
  So this is really not even about money. This is about collective 
greed in that we want to redistribute wealth when people die. We don't 
believe death ought to be a taxable event. That is what it boils down 
to.
  Let me sum up, and then I will yield the floor. What is the No. 1 
reason that 70 percent of all family businesses do not survive into the 
second generation? Seventy percent of all small businesses that 
somebody founded do not survive into a successful operation by their 
children. Why? According to the National Federation of Independent 
Business, it is the death tax.
  Eighty-seven percent of all small businesses fail before they get to 
the third generation of the family member who started them. Why? The 
NFIB says the No. 1 reason is the death tax.
  And finally, 60 percent of all small business owners report that they 
would create new jobs over the coming year if estate taxes were 
eliminated. We have businesses that are buying great big insurance 
policies so their children won't have to sell the business. That money 
could be going into the business instead of being wasted economically. 
If you don't want to destroy small businesses, repeal the death tax.
  My second point: Under the death tax, you are taxed once, you die, 
and then you are taxed again. Why is it right that you earn a dollar; 
the Government takes 40 cents out of the dollar; you plow what is left 
of the aftertax dollar back into your business or your farm; you die; 
and your children have to sell the business or farm to pay a tax on the 
60 cents that you got to keep out of the original dollar? How is that 
right? It is not right.
  No. 3, this is simple, it is clever, but it is just the truth, too. 
It is just the pitiful truth. No one should have to visit the 
undertaker and the IRS on the same day. It is just not right. So often 
we debate these things over numbers and budgets and all these other 
things when this is an issue about right and wrong. This tax is wrong.
  Finally, repealing the death tax would create jobs.
  According to an article in the Wall Street Journal, ``The True Cost 
of Dying,'' on July 28, 1999, they estimate that repealing the death 
tax would create 200,000 jobs. Now, it is true that some of our 
colleagues say if we take the tax cut back and we make people sell 
their farm or their business and give us 55 percent of its value, we 
can spend it on programs. But are those programs worth 200,000 jobs? I 
don't think so.
  So we have before us a proposal that says let's repeal the death tax, 
but only for a few people. Let's raise the cost now when we have a 
deficit, but let's not eliminate the tax when we can afford it and when 
we have a huge surplus. It makes no sense. The plain truth is that a 
great bulk of the cost of making this tax cut permanent occurs in the 
year it expires, which is 2010, and by the most recent Congressional 
Budget Office projections our elimination of the death tax will occur 
in a year when we will have a surplus of $653 billion. And $335 billion 
of that will not belong to Social Security.
  Why should we not repeal the death tax? Is there anything we can 
spend that money for that would be more valuable? I don't think so. I 
hope my colleagues will agree.
  I yield the floor.
  The PRESIDING OFFICER (Ms. Cantwell). The Senator from Arizona is 
recognized.
  Mr. KYL. Madam President, I appreciate the fine explanation of my 
colleague from Texas. He has been an advocate of the repeal of the 
death tax for a long time. I am pleased to join with him in this 
amendment and to be able to say that we have finally been able to bring 
before the Senate the permanent repeal of the death tax.
  I want to make several points. I see that the Senator from Oklahoma 
is here. Was he intending to make a point at this time?
  Mr. NICKLES. I have about 7 or 8 minutes.
  Mr. KYL. I will go ahead. Will the Chair let me know when I have 
spoken for 12 minutes?
  The PRESIDING OFFICER. Yes.
  Mr. KYL. I appreciate that. The first point the Senator from Texas 
made was that the death tax is bad tax policy. Let me explain a little 
bit more of what we mean by that. The Tax Code generally taxes you for 
voluntary conduct. If you sell property, you know there is going to be 
a capital gains tax on that. If you work, you know you are going to 
earn income and you are going to be taxed on that. People make 
decisions based upon tax consequences. But there are a few situations 
in our Tax Code that are treated as involuntary conversions.

[[Page S5354]]

  If the Government condemns your property and pays you money for that, 
you don't want that money; you want your property. The Government 
recognizes that as an involuntary action on your part, so you don't pay 
ordinary income at that time on that money. If your house burns down 
and you collect money from an insurance policy, you didn't intend for 
that to happen. The Government doesn't treat those insurance proceeds 
to you as ordinary income. It is taxed in a different way. The same 
thing is what we are proposing to do with the estate tax. Nobody 
intends for your father, or whoever it might be, to die. He certainly 
doesn't. The money that you may get as a result of that is coming to 
you involuntarily. You didn't take some action in order for it to 
occur. So that money coming to you should be treated in a different 
way.

  The way that it is treated under the amendment of the Senator from 
North Dakota is to take 50 percent of the amount over $3 million. In 
other words, there is a $3 million exemption and, after that, every 
other dollar is taxed at 50 percent. If it is over $10 million, it is 
at 55 percent.
  Now, that is bad tax policy. What we say instead is that the tax is 
not due on the date of death. Death is not a taxable event. Instead, 
the money passes to the heirs and, at that point, if they sell the 
property, there is a taxable event. You pay the capital gains on that 
property. In fact, the basis for the capital gain is the original basis 
on when the property was purchased by the decedent, not the value at 
the time of death. So, in effect, we are replacing one tax with another 
tax. Much of the revenue is not lost to the Treasury as a result. But 
at least as to the decision to pay Uncle Sam, the money comes from the 
voluntary act of people who inherited the property and who are willing 
to pay the capital gains tax if they sell the property, or part of it.
  But what you don't have to do, as the Senator from Texas said, is 
visit the IRS the same day you visit the mortuary. That is wrong. That 
is why over 60 percent of the American people believe this is an unfair 
tax.
  It is interesting that three-fourths of the people surveyed who say 
it is an unfair tax say they would favor its repeal, even though they 
don't believe that repeal would have any effect on them because they 
would not be receiving any of that money, or paying it, as an heir. So 
it is an unfair tax. As a matter of fact, the Senate agreed that it was 
unfair. We repealed it. A majority of Senators voted to repeal the 
estate tax.
  Now, under the procedures under which that was done, no action that 
we took could last longer than 10 years. So the irony is after 10 
years, none of our tax relief exists; it evaporates and we go back to 
where we were in 2001. Did we intend that? When we told our 
constituents we reduced the marriage penalty and reduced their 
individual income-tax rate and repealed the estate tax, were we kidding 
or did we really mean it? We will find out tomorrow.
  If we were just kidding, then we will defeat the Gramm-Kyl amendment, 
or adopt some other proposal. If we meant what we said, saying we meant 
to repeal it, to cast the vote to do that, and since that sunsets after 
10 years, we are going to permanently repeal it with our vote today, 
you will support the Gramm-Kyl amendment.
  Some say this doesn't affect many people. The fact is that it doesn't 
just affect the rich. The descendant--the rich person--died. He cannot 
be affected; he is gone. Most of the people who inherit the money are 
not rich, and certainly the employees of their companies or the farms 
are not rich. So most of the people who are affected by the death tax 
are not wealthy at all.
  The question is, Do you want to take half of what they are going to 
get from the person who worked so hard during his or her life to 
provide it to them? According to the Treasury Department, 45,000 
families paid some level of estate tax in 1999. That is families. If it 
is a family of four, multiply that by 4 to see the number of people who 
are immediately affected, and then you can add to that the people 
indirectly affected. What is not included in the statistics is twice as 
many people sell their business or their farms. Many more people are 
adversely impacted when jobs in the community are lost when a family-
owned business is sold to pay the tax.
  In addition, more than 2 percent of Americans bear the aggregate 
costs of this tax--fees to lawyers and accountants and life insurance 
agents. As a matter of fact, it costs just about exactly as much for 
the people who pay the lawyers and insurance agents and the accountants 
to avoid the total consequence of the tax as the Federal Government 
collects from those who actually end up paying. So it ends up being a 
double tax on Americans. Half pay the tax to Uncle Sam and the other 
half pay the lawyers. I don't know which is worse.
  The death tax not only impacts more than 2 percent of Americans, it 
burdens family-owned businesses under $100 million in value. According 
to the IRS, in 1999, 116,500 estate tax returns were filed; 60,700 of 
these returns were filed by estates with values of less than a million 
dollars. Estates valued between $1 million and $5 million filed 50,600 
returns. There were 5,200 estates filed of more than 5 million. So even 
combined, the millionaires filing for the tax do not exceed the 
nonmillionaires.
  The bottom line is that Americans recognize it is an unfair tax. It 
affects a lot more people than the person who had wealth when he died. 
The Senate recognized the same thing when it adopted the repeal of this 
tax.
  Madam President, I was a bit surprised by the amendment of the 
Senator from North Dakota.
  I know a lot of our colleagues on the other side of the aisle are 
opposed to permanent repeal of the estate tax. I thought what they 
would do was offer a fairly generous package that would be tempting for 
our colleagues to vote for in lieu of the real repeal, which is the 
Gramm-Kyl repeal. As it turns out, that was not done. It is a very 
straightforward proposal which is not generous at all. As a matter of 
fact, it is worse--it is worse--than the status quo. People would be 
better off under the existing law, even without the ultimate repeal, 
than they would be taking the amendment of the Senator from North 
Dakota.
  It is interesting that while he is concerned about the cost of repeal 
in the first 5 years, for which we have figures, the repeal of the 
proposal before us of the Senator from North Dakota would be about $22 
billion versus $9 billion for our proposal at a time when we are in a 
deficit situation, as the Senator from Texas noted.
  The only way this is made up is that in return for that, we 
immediately go from a reduced rate of taxes under our bill and under 
the status quo to a 50-percent rate under the amendment of the Senator 
from North Dakota. The exemption amount is $3 million. The exemption 
under ours by the year 2009 is $3.5 million and, of course, in the 
final year, there is no need for an exemption from the estate tax 
because the estate tax is repealed.
  Under the substitution of the capital gains tax for the estate tax in 
the Gramm-Kyl proposal, we retain a $5.6 million equivalent to an 
exemption so that nobody will pay a capital gains tax who would not 
have paid an estate tax. People are made whole, in other words.
  Under no scenario would you be better off under the amendment of the 
Senator from North Dakota. You would be much better off under the 
amendment Senator Gramm and I have proposed.
  Let me make one other point. When we talk about the cost of this 
proposal, it is always a bit frustrating for me because we are talking 
about lost revenues to the Federal Treasury. To me, that is not a cost; 
that is an opportunity for Americans to keep more of their own money.
  What we know from tax policy generally is if you reduce people's 
taxes, you improve the status of the economy. One thing we forget when 
we talk about the alleged cost of the repeal of the estate tax is the 
positive effect that has on the economy. A study conducted by Alan 
Sinai shows the GDP of our country could increase a total of $150 
billion over 10 years and job growth could increase 165,000 per year 
with repeal. The increase in household savings would be between $800 
and $3,000 annually. So the impact on families and on the GDP would be 
significant from a repeal of the estate tax.
  A Joint Economic Committee study estimates the existence of the tax 
has reduced the Nation's pool of savings by $497 billion. An expert in 
this area testified before our Finance Committee

[[Page S5355]]

and said immediate repeal of the death tax would result in a $40 
billion economic stimulus.
  If you really want to stimulate the economy, if you really want to 
create more jobs, if you want to enhance the GDP and if you want to 
enhance personal savings and personal income, then repeal the tax.
  It is true that the Federal Government is a little worse off if we 
repeal the tax. It does not take in quite as much money. But American 
families have a lot left, and the American economy is a lot healthier 
as a result.
  What happens when the economy grows? We all know that tax collections 
by the Government actually increase when the economy grows. We do not 
have an exact study on what Federal revenue increases would be, but we 
know they would be significant.
  A final point: There is always the bottom line argument: when you 
cannot scare people any other way, say that Social Security might be 
affected.
  There is zero effect; there can be no effect on Social Security by 
repeal of the death tax. The death tax has nothing to do with Social 
Security. The death tax goes to the general revenues. It is about 1 
percent, 1.5 percent of general revenues. It has no impact on Social 
Security. It pays none of the Social Security benefits.
  Today, in the year 2002, we will be taking in about $624 billion in 
Social Security, and the payments to Social Security recipients are 
about $465 billion, so we have about a $175 billion surplus in Social 
Security funds.
  No Social Security recipient could be affected by repeal of the death 
tax. Let's at least understand that and not scare people by suggesting 
there is an adverse impact on Social Security.
  We have more points. I reserve the remainder of our time.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. NICKLES. Madam President, first, I compliment my friends, Senator 
Kyl and Senator Gramm, for their leadership in trying to eliminate one 
of the most unfair taxes in U.S. history. We have a chance to do it. We 
have two proposals that are before us. One is by Senator Gramm and 
Senator Kyl, of which I am a cosponsor, to repeal the death tax so 
there will not be a taxable event on somebody's death. Now there will 
be a taxable event when the property is sold, also known as a capital 
gains tax. That is 20 percent. That ought to be enough.
  We are trying to make permanent the repeal in the year 2010. Let's 
make that permanent. That is our objective. Under that scenario, if 
there is property in an estate--let's say it is a business, a 
manufacturing company, maybe it is a farm or ranch, maybe it is a 
restaurant in downtown Washington, DC. That restaurant may sell for $5 
million. Maybe it is a second or third generation restaurant, Mortons, 
and it is worth several million dollars. If the son or daughter takes 
over that business and they do not sell it, there is not a taxable 
event. But if they decide it is too much of a hassle and they do not 
want to continue the operation and they sell it, then there is a 
taxable event. It will be taxed as capital gains at 20 percent instead 
of under Senator Conrad's proposal of 55 percent.
  I probably shocked somebody when I said 55 percent. I read Senator 
Conrad's proposal as 50 percent. He has an exemption of $3 million, and 
in a few years $3.5 million, but above that is taxable at 50 percent. 
If you have an estate between $10 million and $17 million, there is 
another 5 percent kicker, and so the Federal Government will get 55 
percent.
  Why in the world would the Federal Government be entitled to take 
over half of somebody's property for which they worked their entire 
lives? Should the Federal Government come in and take half or over 
half? That is what is in the Conrad proposal.

  We have two competing proposals. What will the impact be? Look at the 
businesses in Washington, Oregon, or Maine. We can all think of very 
successful people who have built businesses and have employed a lot of 
people. A lot of those are worth more than $3.5 million. Senator 
Conrad's proposal says we want half of the property's worth when 
somebody passes away. I happen to think that is absolutely wrong. 
Whether the value of that business is $3 million or $100 million, if 
somebody wants to continue operating that business, why should the 
Government come in and say: No, stop, we want half; somebody died; 
stop; we want the Federal Government to come in and take half? That is 
what Senator Conrad's proposal is. I object to that.
  I learned the hard way. My grandfather started a business. My dad 
built it up. He died when he was pretty young, and the Government came 
in and said: Stop, we want half. We fought the Government for 7 years. 
Frankly, the business was a small, family-held business, and Uncle Sam 
said: We want half of it. We objected to that and we fought them for 
years. We ended up settling. They ended up getting a lot more than they 
should have.
  The Government's purpose and function should be to protect our 
property, not confiscate it. If one thinks about it, under the Conrad 
proposal, if they get half--and let's say it is over $3 million,--
somebody passes away this year, and then in the next generation 
somebody else passes away 20 years later, and they get half again. What 
a disincentive to grow, build, and expand.
  There are countless generations across the country trying to grow, 
build and expand by employing more people and creating more products. I 
think of a company in Perry, Oklahoma called Ditch Witch. They 
manufacture trench makers. These machines are used to lay cable, phone 
lines, pipelines, help build roads, among many other uses. Perry, OK, 
has a population probably of 12,000 people, of which Ditch Witch 
employs a couple thousand. It is a great little family-owned business. 
Why should the Government come in and say: Stop, the proprietor passed 
away; we want half of it? What about those thousands of jobs?
  Look at another company called Bama Pies. They make pies in Tulsa, 
OK. They make millions of pies, including all the pies for McDonald's. 
They employ hundreds, if not thousands, of people. It is a closely held 
business.
  Why should the Government come in and take half because the 
entrepreneur who built that business happens to pass away and the value 
of the business is in the millions? I do not think they should.
  That is what we are talking about. Should the Government come in and 
say, oh, well, you have been relatively successful, and because your 
estate is in the upper maybe 1 percent or 2 percent, it is okay if we 
sock it to you? What is right about that? What is fair about it? Where 
are the jobs that are in that kind of an ordeal? We think the 
Government can operate it better? Sorry, you have to sell it to pay 
estate taxes. We hope the company will survive in its next form. Maybe 
it will. Maybe it will not. There are a lot of operations that cannot 
withstand that type of a heavy tax.
  A farm or a ranch is another good example. You might have a fairly 
decent farm or ranch maybe adjacent to a large city and so its property 
valuation is very high. This value could maybe exceed it's agriculture 
valuation, or the profits or the money that would be generated from the 
agriculture. Just because it happens to be next to San Diego it is 
worth millions on the valuation sheets. Maybe somebody says, well, I 
want to continue farming it and ranching it; I am second or third 
generation. And we are going to say, no, we are sorry; we have valuated 
this, and because it happens to be next to San Diego, it is worth 
millions of dollars so the Federal Government is entitled to take half. 
They cannot pay half by continuing their agricultural operation, so the 
only way they can pay taxes is to sell it. What kind of victory is 
that? We have just broken up a family business, a family farm, or a 
family ranch. Why? So Uncle Sam can take half that property? Maybe that 
property is not worth near as much in that present function. What right 
do we have to do that?
  Some taxes are wrong, and this tax happens to be one of those that 
are wrong. The power to tax, it has often been said, is the power to 
destroy. If the Government can take half--and in the amendment of 
Senator Conrad, the Government can take half. If you have a taxable 
estate over $3 million, then they have taken away a lot of your--maybe 
destroyed a lot of incentive to build, grow, expand, and employ. I 
think of so many entrepreneurs who have built and expanded businesses 
that are now worth millions of dollars.

[[Page S5356]]

I look at this amendment and it says: Stop; do not grow anymore because 
Uncle Sam is going to come in and take half of it. We have decided that 
is our property and we can handle it better than you can. How many 
employees will the Government hire out of that type of operation?
  I completely disagree with the premise espoused of, let's keep the 
rates at 50 or 55 percent. Again, I mention the rate. Under the 
proposal of Senator Conrad, there is a maximum rate because he has this 
bonus 5 percent hit if your taxable estate is between $10 million and 
$17 million. Well, $10 million and $17 million sounds like a lot if 
that is your disposable income, but if that is your investment that you 
have grown in plant and equipment, and you are putting the money back 
in the business year after year, it may not be that big. You may not 
make that much money. You may have a business that is worth $20 million 
but it may not make very much money. Yet, under Senator Conrad's 
amendment, too bad: You pass away, we have a taxable event, and Uncle 
Sam gets half. If it is a $20 million business, take away your $3 
million deductible and you have a $17 million business. Under his 
proposal, half of it goes to Uncle Sam--actually, 55 percent of the $17 
million. The Government is going to get almost $9 million out of a $20 
million business. Congratulations, you are really successful. If this 
is the case, where are the liquid assets in this $20 million business? 
You do not have them. You have invested them in plant and equipment, in 
machinery, in jobs. You did not have them sitting around in CDs and 
cash, so you have to sell the business to pay the taxes.

  That is what the amendment of the Senator from North Dakota is. It 
says, Government, you are entitled to take half; and many of us say, 
no, you are not. This tax is unfair. It needs to be repealed.
  We took a giant step in that direction when we phased down the tax 
and repealed it in the year 2010. We need to make it permanent, and 
that is exactly what the Gramm-Kyl-Nickles amendment does, makes it 
permanent. Senator Conrad's amendment says, no, we do not want to do 
that. We will increase the exemption a little bit and then the 
Government is entitled to get half.
  I hope my colleagues will reject that type of unfair tax policy that 
needs to be repealed. Even if it applies to one small percentage of the 
American population, it is not right to take it. One can say, well, is 
it right to take 100 percent of somebody's property if it only affects 
a few? I think of that as theft, rather than good, sound tax policy.
  I heard some people complain, what about the effects on deficits? I 
started looking at spending. I always hear when we talk about taxes, 
but when we talk about spending we do not hear about people talking 
about, what is the impact on Social Security? What is the impact on 
future deficits? Between the years 2000 and 2001, budget authority went 
up from $584 billion to $664 billion. That is a 14-percent increase. 
Between the years 2001 and 2002, it went up to $710 billion. That is a 
7-percent increase. That was before we started working on the 
supplemental. The budget we are working on now that just passed--if we 
include the supplemental that just passed Congress--is $768 billion. If 
we add that together, that is an 8-percent increase over the previous 
year. So we are compounding spending at 14, 7, 8 percent.
  Then I look at some of the other requests. The farm bill that we 
passed about a month ago was $82 billion over the baseline. We are 
paying cotton farmers 72 cents per pound when we look at cotton that is 
selling for 32 cents. The market price for cotton is 32 cents, but we 
are going to pay farmers 72 cents for 6 years.
  Look at railroad retirement. We are writing out a check for $15 
billion for railroad retirement, something we have never done before.
  The Trade Adjustment Assistance Program we passed had $11 billion of 
new entitlements, where the Federal Government is going to pick up 60 
percent of health care costs for people who happen to be uninsured, 
unemployed.
  We are going to have a new wage entitlement insurance program under 
trade adjustment assistance. The supplemental was $3.9 billion over the 
President's request. The supplemental was almost $4 billion above the 
President's request. Trade adjustment assistance had $11.1 billion over 
the President's request in new entitlements. The farm bill was $82.8 
billion over the baseline. Railroad retirement is $15 billion. So there 
is a lot of new spending in excess of about $120 billion that Congress 
has passed in the last few months. Where is the outrage on the impact 
on deficits on these bills?
  When we start talking about not taking away half of somebody's 
property when they die and reject this tax policy, perhaps we should 
have the tax policy be enacted when their property is sold by their 
beneficiaries. Then there is a taxable event and that taxable event is 
taxed at the capital gains rate, which is 20 percent. With this method, 
you would eliminate these billions of dollars that are being spent 
presently to avoid the tax. To everyone who knows estate planning, the 
lawyers and the accountants, this is an enormous field, which in my 
opinion uses a lot of minds in a productive venture to avoid a very 
unfair tax.
  If we said, let us have a tax on capital gains, it would simplify 
taxation. I think we would see a lot of businesses grow if they did not 
receive this signal, stop, do not grow anymore because we are going to 
take half of everything you have. The economy would respond in a very 
positive way. We would create thousands, maybe hundreds of thousands, 
of jobs if we could repeal this unfair tax.
  I urge my colleagues, when we vote tomorrow, when we have final 
passage, to vote in favor of the Gramm-Kyl-Nickles amendment to repeal 
permanently this unfair death tax.
  Mr. CONRAD. Madam President, I have been amazed at the argument from 
the other side, absolutely amazed. My amendment is not as good as the 
status quo? Their proposal is better? What math are they using?
  I grew up in North Dakota, went to North Dakota schools where one and 
one is two; two and two is four; four and four is eight. That is the 
math I learned. I don't know what math they are talking about.
  Let's talk about the difference between my proposal before the Senate 
and their proposal. Let's talk about current law. They say mine is not 
as good as current law. Under current law, next year the exemption will 
be $1 million. That is 2003. Under my proposal, the exemption is $3 
million. So the rate for an individual who has an estate that is taxed 
next year below $3 million, the rate is zero; their rate above $1 
million is 41 percent. Which is better? A zero rate up to $3 million, 
as in my proposal? Or their proposal, which is a 41-percent rate over 
$1 million? Can we do the math? Which proposal means less tax to the 
individual in the family? Zero percent up to $3 million? Or their 
proposal that says a 41-percent rate over $1 million.
  Compare it to current law. My rate is zero percent up to $3 million. 
They have zero up to $1 million. That is current law. But over that the 
rate is 41 percent. Let's see, are you going to pay less tax under my 
proposal or their proposal? Are you going to pay less tax under my 
proposal or under current law? Come on. I am ready to have an honest 
debate but let's not twist things around and claim that my proposal 
taxes more than your proposal. That stands truth and logic on its head.
  Mr. KYL. Will the Senator yield for a question?
  Mr. CONRAD. I yield.
  Mr. KYL. I agree with the point in the first year there is a greater 
benefit for individuals but a higher cost to the Government. Would the 
Senator continue the timeline over the next 10 years?
  Mr. CONRAD. I would be happy to do that.
  The next year, 2004, their exemption is $1.5 million for current law 
with a 41-percent rate. Their proposal is a $1.5 million exemption with 
a 43-percent rate. My proposal is $3 million, nothing, no tax. So you 
are higher in 2003; you are higher in 2004; you are higher in 2005; you 
are higher in 2006; you are higher in 2007. That is a long time in 
which my proposal is better than your proposal.
  Not only is my proposal better in terms of the taxpayer for those 
years, my proposal is better for the Federal Government's Treasury and 
for fiscal responsibility and for Social Security because our proposal 
costs less over the

[[Page S5357]]

next decade than does theirs. Why is that? Because at the end of the 
decade they eliminate the estate tax completely. It does not matter how 
big. It does not matter if you have a $50 billion estate, they say you 
pay no tax.
  The Senator from Texas talked about what is fair and right. Let me 
give an example of why I think what he is proposing is less fair, is 
less right, than what I am proposing.
  Under their proposal, someone with an estate of $50 million--for 
example, Mr. Skilling, the executive who ran Enron. He would have his 
estate tax eliminated. The $55 million he would save would be 
equivalent to all of the Social Security taxes paid in one year by 
30,000 people earning $30,000. In other words, in their idea of what is 
fair, it is more important to take Mr. Skilling off the tax rolls 
completely, even though his gains, many might say, are ill gotten, it 
is more important to take him off than to worry about the 30,000 
Americans earning $30,000 a year paying that amount of money into 
Social Security. Make no mistake, these things are directly related.

  The proposal I have offered reforms the estate tax. It says nothing 
is paid starting next year if you are an individual with an estate of 
less than $3 million, and for a couple that is up to $6 million. You 
pay zero. That is much better for next year, and 2004, and 2005, and 
2006, and 2007, than their proposal. But, at the same time, my proposal 
costs less because we do not eliminate the estate tax. So my proposal 
costs $12.6 billion in the first decade; their proposal costs $99.4 
billion. That is a dramatic difference. It is at a time when we will be 
running deficits for the entire next decade. Let me repeat that. We 
will be running deficits for the entire next decade unless something 
changes. And just hours ago we had to increase the debt of the United 
States $450 billion. They are proposing a cost in the second 10 years 
of $740 billion.
  Reform, not repeal, is the best thing for this country's economy, for 
our fiscal stability, and for fiscal responsibility. And interestingly 
enough, it is the best thing for taxpayers. It is the best thing for 
taxpayers because they get a better break now. We go from a $1 million 
exemption to a $3 million. Next year, that would be $6 million for a 
couple.
  This idea of repeal which they have proposed is a hoax. I don't think 
it will ever happen. They can pass it now, but I don't think it will 
happen. By some other name this tax will come back and we will have 
denied people the ability to plan and we will also have denied people 
the chance to get a greater exemption now, which is what I am 
proposing.
  When I was raised, I was taught a bird in the hand is worth two in 
the bush. This proposal I am making is a bird in the hand, a $3 million 
exemption, or a $6 million exemption for a couple, starting next year, 
instead of the $1 million exemption that exists in current law and the 
$1 million they have in their plan.
  The choice is pretty clear, pretty simple, but pretty important.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Madam President, our dear colleague has a substitute which 
costs a ``fraction'' of a repeal but it is better. If his amendment 
sounds too good to be true, it is because it is too good to be true.
  The first thing he never mentioned was if you are a small business or 
family farm and you are engaged in any estate planning, and we know 
that small businesses and family farms spend dollars in estate 
planning, this completely wipes all that out. I can show figures on a 
small business, a $10 million small business, the tax would equally be 
higher next year under his proposal than under ours. But we do not have 
to get into all this gamesmanship. It really boils down to a simple 
question. We repeal the death tax for everybody.

  Mr. CONRAD. Will the Senator yield on that last point?
  Mr. GRAMM. I will yield. I only have a couple of minutes, so do it 
fast.
  Mr. CONRAD. I would love to see the calculation the Senator has.
  Mr. GRAMM. I will be glad to show him. I have someone from the 
Finance Committee here, the staff person who worked on this. She worked 
out the example of $10 million, and I will send her over with it so 
your staff can take a look at it.
  Mr. CONRAD. I would love to take a look at that.
  Mr. GRAMM. Here is the point. We don't need to get into all this 
business about ``he did,'' ``he didn't,'' ``he did,'' ``he didn't.'' It 
boils down to this. We said we repeal the death tax and we repealed it. 
Only there is a trick: it comes back in 10 years.
  Senator Kyl and I want to repeal it so it is dead forever. We do not 
think death ought to be a taxable event. We don't think you ought to 
have to sell your family's farm, business, or estate to pay tax on 
money which you have already paid taxes on.
  The Senator says let's do it for some people but not other people. 
Let's do it for some Americans but not other Americans. And let's, at 
the same time, ban all of the procedures whereby every small business 
in America and every family farm in America is planning for estate 
taxes to try to minimize their costs.
  The bottom line is: Are you for a repeal for everybody or are you for 
a repeal for some of the people? It really boils down to that simple 
issue.
  As for this argument about Social Security, I hope everybody 
understands that we collect a payroll tax for Social Security. The 
death tax collects less than 1 percent of revenues, and none of that 
money goes into Social Security. In fact, as I pointed out over and 
over and over, five times in the last 9 months we have spent 
cumulatively about 20 times the amount that it would take to repeal the 
death tax. So, obviously, it is not a question of money. It is a 
question of priorities.
  I yield the floor. We are through on our side.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Senator from Arizona.
  Mr. KYL. Might I address a question to the Senator from North Dakota 
since the Senator from Nevada is not here. It is our understanding 
under the unanimous consent agreement the next amendment that will be 
laid down will be laid down by Senator Dorgan or by Senator Reid on his 
behalf?
  Here is Senator Reid. Perhaps we could get this underway now. If I 
could inquire of the Senator from Nevada, the time having expired under 
the unanimous consent agreement on the first amendment laid down, is 
the amendment of the Senator from North Dakota next? The next thing 
that will transpire is that the Senator from Nevada on behalf of the 
other Senator from North Dakota will lay down an amendment; is that 
right?
  The PRESIDING OFFICER. The Senator from North Dakota still has 5 
minutes.
  Mr. KYL. I am sorry. I thought the Chair said all time had expired.
  The PRESIDING OFFICER. The time of the Senator from Texas had 
expired.
  Mr. KYL. If the Senator from North Dakota still has 5 minutes, I will 
yield the floor to the Senator from North Dakota. But if we could get a 
clarification about what is going to happen when that time has expired, 
I would appreciate it.
  Mr. REID. If the Senator from North Dakota will yield without this 
time counting against his 5 minutes, I will respond to the question of 
the Senator from Arizona.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. I say to the Senator, at this time the Senator from North 
Dakota, Mr. Dorgan, is working on some minor changes in the amendment 
that he offered previously. That amendment, I cannot go into detail on.

  Basically, what it does is exempt from the estate tax small farms and 
businesses that let descendants take over after the death of the 
party--the same amendment he offered previously that I think got 43 
votes. Basically, that is the amendment.
  I do say to my friend, I just talked to the cloakroom and he is 
making some changes. We were and are entitled to two second-degree 
amendments under the unanimous consent agreement. At this stage we may 
only offer one of them. Senator Dorgan is trying to change the one 
amendment so there may be one amendment rather than two. As soon as we 
get something in writing, we will let the Senator from Arizona know. I 
do not think there is any question that the amendment you are going to 
lay down is the same one we have seen before, just an outright repeal?

[[Page S5358]]

  Mr. KYL. Also, not taking away the time of the Senator from North 
Dakota, the Senator from Nevada is correct. I just inquire, then, for 
the benefit of all Senators, when the Senator from North Dakota has 
completed his 5 minutes of concluding remarks, could the Senator from 
Nevada explain what happens at that point?
  Mr. REID. I have spoken to the majority leader. We have the Prime 
Minister of Australia coming for a joint session of Congress tomorrow 
morning. We are going to do a limited amount of morning business in the 
morning. Then the escort committee would go with the Senators over to 
the House side and listen to that speech. That is expected to be 
completed and we will be back in session approximately 12:30 tomorrow 
afternoon.
  At that time, Senator Dorgan will lay down his second-degree 
amendment with a 2-hour time limit. We would vote at approximately 2:30 
on the Dorgan amendment, then the Conrad amendment, and then we would 
turn to the Senator from Texas. He would lay down his amendment which 
would probably be around 3:15. At 5:15 or 5:30, thereabouts, debate on 
that would be completed, and I hope on or about that time we could vote 
on the amendment of the Senator from Texas and be finished with this 
matter.
  Mr. GRAMM. If the Senator will yield, let me just reaffirm so 
everybody knows, I will offer exactly the language that passed the 
House, repealing the death tax permanently. So if we did it, it would 
go right to the President, he would sign it into law.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Madam President, let me conclude this debate as I began. 
I believe our votes must be informed by the current fiscal condition of 
the country. As the President said to us last year, his budget was 
going to pay off $2 trillion of debt over the next decade. He said, at 
that time, that would be the largest debt reduction of any country 
ever.
  Now the President comes to us 1 year later and says: Whoops, forget 
about that. Forget about maximum paydown of the debt. Forget about 
paying down more debt than any country ever. Instead of paying down 
debt, I am asking you, Members of Congress, for the second biggest 
increase in the debt in our Nation's history.
  The only bigger request for an increase in the debt was made by the 
current President's father when he was President. He asked for and 
received a $915 billion increase in the national debt in one fell 
swoop, in November of 1990.
  Now comes this President and he asks for a $750 billion increase in 
the debt, the second biggest in our Nation's history.
  We all have to think a moment about the changed circumstances. Just 
hours ago, this Chamber voted to increase this Nation's debt by $450 
billion. Now our colleagues on the other side are here saying they want 
to increase the debt another $100 billion in this 10 years, by another 
$740 billion in the second decade.
  Let's look at where we are and where we are headed. This chart shows 
that from 1992 to 2000 we pulled out of deficit. We got ourselves into 
circumstances in which we were running surpluses. Last year with the 
President's budget plan we plunged back into deficit, and we now are 
told that we can expect deficits the entire rest of the decade. That is 
before their proposal to dig the hole even deeper. And the outlook for 
the years beyond is even more serious.
  That brings us to the question of what do we do on the estate tax. I 
acknowledge we need to reform the estate tax--$1 million is too low for 
a tax to be imposed. So I proposed that next year we go to $3 million 
of exemption for an individual estate; $6 million for a couple. They 
would pay zero under my proposal. A couple would pay no estate tax up 
to $6 million. Our friends on the other side, they don't get to $3 
million until 2009.
  My proposal also freezes the maximum estate tax rate at 50 percent. 
It retains stepped-up basis. I know that is a confusing term, but it is 
an important one. What it means is that in the future, you will pay 
taxes on what you inherit based on the value at the time you inherit 
it, not what grandpa paid for the property, not what grandma paid for 
the property, but what it was worth when it passed to you.
  That is a very important difference between their proposal and mine. 
While my proposal is more generous to taxpayers in the short term, it 
is also more fiscally responsible because we don't eliminate the estate 
tax completely as their proposal does. They are proposing to eliminate 
the estate tax completely after the year 2010. My proposal saves 
hundreds of billions of dollars that otherwise are going to come 
straight out of Social Security. There is no other place for it to come 
from. They deny it. They say this has no effect on Social Security. 
Really? Where is the money coming from? There is only one place it can 
come from; that is, straight out of Social Security.
  My proposal will reduce the number of estates that are taxable from 
the current level, which is 2 percent. Only 2 percent of all estates in 
America have any tax. I would reduce that to three-tenths of 1 percent, 
but at the same time save the fiscal position of the country.
  There is no question that what they are talking about--estate tax 
repeal--raids Social Security trust funds. Look at what it does. Their 
idea of fairness is to eliminate the estate taxes for somebody like Mr. 
Skilling, former CEO of Enron, who would save under their plan an 
estimated at $55 million. That is equivalent to all of the Social 
Security taxes paid in a year by 30,000 American people earning 
$30,000.
  They say their proposal is fair. They say their proposal is 
equitable. I don't see it. Taking all of the taxes from 30,000 people 
earning $30,000 a year to eliminate the estate taxes of Mr. Skilling is 
not fair.
  I thank the Chair. I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Dayton). The clerk will call the roll.

  The senior assistant bill clerk proceeded to call the roll.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DASCHLE. Mr. President, I wanted to announce that there will be 
no further votes today. I appreciate the vigorous debate we have had on 
the Conrad amendment, and appreciate Senators coming to the floor to 
move the schedule along.
  It is my hope that we will have a vote at approximately 2:30 
tomorrow, and it may be stacked with another amendment.
  I urge Senators to offer their amendments because we will miss a 
window here, and we will then make a point of order on the bill itself 
sometime tomorrow.
  We are not going to wait for Senators. They are either going to offer 
their amendments or they are going to miss the opportunity.
  So those Senators who have amendments need to come to the floor and 
lay them down and have the debate, as Senator Conrad did this 
afternoon.
  We will pick up this debate again tomorrow morning.
  I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Dayton). Without objection, it is so 
ordered.

                          ____________________