[Congressional Record Volume 148, Number 77 (Wednesday, June 12, 2002)]
[Senate]
[Pages S5398-S5434]
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 Senate will now 
resume consideration of H.R. 8, which the clerk will report.
  The legislative clerk read as follows:

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

  Pending:

       Conrad amendment No. 3831, in the nature of a substitute.


                           Amendment No. 3831

  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Madam President, what is the issue before the Senate?
  The PRESIDING OFFICER. The Conrad amendment No. 3831.


                Amendment No. 3832 to Amendment No. 3831

  Mr. REID. Madam President, on behalf of Senator Dorgan, I send an 
amendment to the desk.
  The PRESIDING OFFICER. Without objection, the clerk will report.
  The legislative clerk read as follows:

       The Senator from Nevada [Mr. Reid], for Mr. Dorgan, for 
     himself, Mr. Durbin, Mrs. Carnahan, and Mr. Corzine, proposes 
     an amendment numbered 3832 to amendment No. 3831.

  Mr. REID. Madam President, I ask unanimous consent that the 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 make permanent 
    the estate tax in effect on December 31, 2009, to increase the 
 exclusion amount to $4,000,000 in 2009, and to provide a full family-
               owned business interest deduction in 2003)

       In lieu of the matter proposed to be inserted, insert the 
     following:

     SECTION 1. ESTATE TAX WITH FULL TAX DEDUCTION FOR FAMILY-
                   OWNED BUSINESS INTERESTS.

       (a) Elimination of Estate Tax Repeal.--
       (1) In general.--Subtitle A of title V, sections 511(d), 
     511(e), and 521(b)(2), and subtitle E of title V of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001 are 
     repealed.
       (2) Conforming amendments.--
       (A) The table contained in section 2001(c)(2)(B) of the 
     Internal Revenue Code of 1986 is amended by striking ``2007, 
     2008, and 2009'' and inserting ``2007 and thereafter''.
       (B) The table contained in section 2010(c) of such Code is 
     amended by striking ``2009'' and inserting ``2009 and 
     thereafter''.
       (C) Section 901 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is amended--
       (i) by striking ``this Act'' and all that follows through 
     ``2010.'' in subsection (a) and inserting ``this Act (other 
     than title V) shall not apply to taxable, plan, or limitation 
     years beginning after December 31, 2010.'', and
       (ii) by striking ``, estates, gifts, and transfers'' in 
     subsection (b).
       (b) Increase in Exclusion Amount.--The table contained in 
     section 2010(c) of the Internal Revenue Code of 1986 
     (relating to applicable credit amount), as amended by 
     subsection (a)(2)(B), is amended by striking ``$3,500,000'' 
     and inserting ``$4,000,000''.
       (c) Full Tax Deduction for Family-Owned Business 
     Interests.--
       (1) In general.--Section 2057(a) (relating to deduction for 
     family-owned business interests) is amended--
       (A) by striking paragraphs (2) and (3), and
       (B) by striking ``General Rule.--'' and all that follows 
     through ``For purposes'' and inserting ``Allowance of 
     Deduction.--For purposes''.
       (2) Permanent deduction.--Section 2057 is amended by 
     striking subsection (j).
       (d) Effective Date.--The amendments made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2002.

  The PRESIDING OFFICER. Who yields time? If no one yields time, time 
shall be charged equally to both sides.
  Mr. REID. Madam President, I suggest the absence of a quorum and I 
ask unanimous consent that time be charged equally against both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRAMM. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAMM. Madam President, let me remind my colleagues where we are 
and what we are doing. Last year, we adopted a repeal of the death tax. 
Under that repeal, we phased up the exemption. We will soon start 
phasing down the rates, and in 2010 we will actually repeal the death 
tax. But because of a quirk in the rules of the Senate and the budget 
process, this death tax snaps back into full force in 2011.
  Members of the Senate voted to repeal the death tax. They proclaimed 
they were repealing the death tax. We are here today to really finish 
that work by simply taking the provisions of law that are in place and 
in 2010--a

[[Page S5399]]

year when according to the Congressional Budget Office March estimate 
we will have a surplus of over $300 billion--we would eliminate the 
death tax forever rather than having the death tax come back from the 
grave to prey on working families. That is the provision we are here to 
debate.
  We have had offered an amendment which is really not about protecting 
family farmers. It is not about protecting small businesses. It is 
about protecting politicians. It is an amendment that makes a nominal 
change in existing law that still allows the death tax to continue but 
it claims to give an unlimited exemption to small businesses and to 
small farmers under a section of law called section 2057. This is a 
provision that was proposed last year by the opponents of the death tax 
repeal as an alternative when we voted on repealing the death tax. It 
is in law today but at a lower level of protection.
  The point I want to make is, section 2057--which this amendment 
claims would be expanded to shelter more value in small business and 
family farms--and all the other special exemptions put together have 
been used by only 33 taxpayers in the time they have been in effect. In 
other words, these provisions that supposedly shelter and give small 
business and family farms special protection are so convoluted, so 
burdensome, so inefficient that only 33 taxpayers in the years since 
these provisions have been in effect have found it possible to use this 
section 2057 to gain the promised relief.
  So the reality is, if this amendment were adopted, it would provide 
assistance to 33 known taxpayers but it would provide a figleaf to 40 
Senators by allowing them to vote against the repeal of the death tax 
once and for all.
  My colleague and cosponsor on this bill is a distinguished attorney, 
and I want to give him an opportunity to talk about this provision in 
some detail, but let me basically sum up the arguments we have heard 
thus far and that we are certainly going to hear today.
  The first argument we are going to hear is that repealing the death 
tax is going to cost money, is going to drive up the deficit, and is 
going to increase debt. I remind my colleagues that under the latest 
estimates we have, the death tax collects less than 1 percent of the 
revenues that we collect in the Federal Government.
  Yesterday, I made reference to two studies, one by our own Joint 
Economic Committee titled ``The Economics of the Estate Tax,'' and the 
other by the Institute for Policy Innovation titled ``The Case For 
Burying the Estate Tax.'' Both of these studies make a very strong case 
that by forcing small business and family farmers who are trying to 
protect their families from the death tax to pay these big insurance 
policies, to hire all these lawyers, to hire all these accountants, and 
by forcing people to sell off businesses and farms prematurely to try 
to plan for this tax, we have lowered the efficiency of the economy. 
The study by our Joint Economic Committee concludes that the level of 
capital in America is $50 billion lower than it would be without the 
death tax. The study by the Institute for Policy Innovation concludes 
that by disrupting economic activity and lowering efficiency, this tax 
actually collects no net new revenue.

  Our colleagues say, and we are going to hear it throughout the day in 
the debate, that, well, we would make it permanent but we cannot afford 
it; we cannot afford to make it permanent.
  I remind my colleagues that the amendment I will offer, which is the 
permanent repeal amendment that passed the House, does not go into 
effect until 2010. As I noted earlier, in 2010 we are projected to have 
a surplus of some $300 billion. What those who oppose permanent repeal 
of the death tax are really saying is they want to spend that money.
  There is an interesting paradox here. Despite all the talk we had 
yesterday and will likely hear again today that we simply cannot afford 
to make the repeal of the death tax permanent and we have to force 
families to sell off the family business and sell off the family farm 
and give government 55 cents out of every dollar people have 
accumulated in their working lifetime in aftertax dollars, that we have 
to do that because we need the money, I find it interesting that in 
five different instances over the last 9 months where this Senate has 
voted to spend more money than we would lose in revenues next year if 
we made the repeal of the death tax permanent. We spent $14 billion on 
nonemergency items in the emergency supplemental appropriation that the 
President did not ask for and that over the next 2 years is some four 
times as much as repealing the death tax would save families if they 
got to keep the money.
  The farm bill next year costs seven times as much as letting people 
keep the family farm or keep their small business.
  The energy bill was more expensive than the cost of letting people 
keep their family farms.
  The trade bill added new entitlements that cost more over the next 3 
years than letting people keep what they have accumulated over a 
lifetime.
  Railroad retirement costs 15 times as much next year.
  The stimulus package that was adopted, the parts that were not asked 
for by the President, cost more than making the repeal of the death tax 
permanent next year.
  Finally, the budget reported on a straight party line vote out of the 
Budget Committee adds new spending--not requested by the President, not 
defense related, not related to our security needs in fighting 
terrorism--of $105.8 billion.
  In short, on five different occasions in the last 9 months we have 
voted on the floor of the Senate or in the Budget Committee to add new 
spending that, when it is added up, is some 15 times more expensive 
than repealing the death tax permanently, and yet our colleagues who 
voted for each and every one of these increases in spending now say, 
well, we could afford to spend all of this money but we cannot afford 
to stop forcing families to sell off their farms and their businesses 
and the accumulated value of the life work of their parents.
  That represents misplaced priorities. We have colleagues who could 
name 100 taxes that ought to be increased, who could name 40 tax 
reductions that should be taken back, but they cannot name a single 
Government program that we could live without or we could reduce.
  At its root, this issue boils down to one simple choice. We will hear 
many arguments today, but it comes down to a simple choice. The people 
who do not want to make the repeal of the death tax permanent believe 
it is worth forcing people, at the death of their parents, to sell off 
their life's work to give over half of it to the Government, even 
though it is all aftertax income. They have already paid taxes on it 
once.
  The opponents of making the death tax repeal permanent believe it is 
worth forcing businesses to liquidate farms, to shut down, equipment to 
be sold, jobs to be destroyed, because they believe that having that 
money in Washington so they can spend it is worth it. Those who want to 
make the death tax repeal permanent do not believe that. Those who want 
to make the repeal of the death tax permanent believe we would be 
better off as a nation--we would be richer, freer, happier, and the 
world would be fairer--if, when families work and save and sacrifice 
and pay taxes on every dollar they earn in their lifetime and they 
build up a business, farm, or estate, that their death should not be a 
taxable event.
  We will hear a discussion today that says, OK, we are willing to do 
this for some. We know it is bad for some people, but we want to pick 
and choose as to who has to pay this death tax. The position of those 
who want to repeal the death tax permanently is a position that we 
believe the tax is immoral. We believe it is wrong. We think, whether 
somebody's estate is worth $700,000, or whether they built a business 
that has 200 employees and that has tools and capital and land and 
trucks and equipment worth $10 million, we believe, if they built a 
business worth $10 million, that destroying that business to bring $5.5 
million of that to Washington so we can spend it does not represent a 
good choice in public policy. After all, it is their money. They built 
it. They accumulated it. They sweated and saved and sacrificed for it.
  That ultimately is the issue. We believe it is wrong to tax death. We 
believe it is wrong when people build up assets and build a business 
for government to then destroy it.

[[Page S5400]]

  I showed data yesterday indicating more than 70 percent of small 
businesses that are founded by a family member do not survive into the 
second generation; 87 percent do not survive into the third generation. 
According to the NFIB, the No. 1 reason is the death tax.
  It is time to fix this provision of the Tax Code. We are going to 
have an opportunity to do that. There will only be one real amendment. 
There are two amendments that give political cover. There is one 
amendment I will offer that is exactly the same language the House 
passed, and if we adopt it, it will go to the President and he will 
sign it into law. That is the issue. There is one real repeal, as my 
colleague from Arizona says.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Just so we know where we are, I know there was time during 
the quorum attributed to both sides. How much time remains on both 
sides?
  The PRESIDING OFFICER. Forty-one minutes remain in opposition and 
56\1/2\ minutes remain for the proponents.
  Mr. KYL. Madam President, let me make two quick points. The first has 
to do with the question of who pays the estate tax or the death tax. We 
know it is not the person who died. We know it is the people who have 
the estate and who are required, therefore, to, in many cases, actually 
sell a business in order to generate the cash to pay the tax.
  Who are the estate tax filers and what occupations do they hold? I am 
going to quote from official Internal Revenue Service reports. In the 
last analysis of the IRS of people's occupation and sex in filing 
estate tax returns, published in the Statistics of Income Bulletin, 
summer of 1999, pages 72 to 76, the IRS reports:

       For males, the largest group of filers at 27.7 percent were 
     administrators, upper management and business owners. The 
     second largest group at 12.3 percent were schoolteachers, 
     librarians, and guidance counselors. For females, the largest 
     group of estate tax filers at 14.1 percent were educators. 
     The next largest group at 9.6 percent were in clerical and 
     administrator support occupations.

  A significant number of the total of estate tax filers were 
scientists, sales people, entertainers, airline pilots, military 
officers, and mechanics. That is according to the IRS.
  There is a vision of some fat cat sitting on a yacht someplace that 
we are going to stick and get a lot of money from to run the Federal 
Government. We know the Federal Government's collections of estate 
taxes are only 1 percent, slightly more than 1 percent of total revenue 
collections. Who is that money coming from? The largest group of women 
were educators. The next largest were clerical and administrator 
support people. They are airline pilots, scientists, salespeople, 
military officers, mechanics. I can understand the category of 
entertainers. But, remember, those entertainers pay a lot of income 
tax, too. And the second largest group of males is schoolteachers, 
librarians, and guidance counselors.
  Do we want to punish these people because they have been lucky enough 
to have been born into a family in which their father or mother was 
able to accumulate some kind of an estate? This is perverse tax policy.
  As I said this morning, the primary problem is that the businesses 
that have the value are not easily liquidated to generate the money to 
pay the tax. It is not as if when someone dies there is a lot of money 
in a shoe box and Uncle Sam taps you, as the heir, on the shoulder and 
says, I would like half of that, 50 percent. That is not what happens.
  Ordinarily what happens is there is a business. We talked this 
morning about the Boone County Lumber Company in Columbia, MO. They 
have a lot of money tied up in lumber that they bought that they hope 
to sell--in trucks, in forklifts, in warehouses, and so on. That is 
equipment that enables 30 people to have a job. When the owner of that 
business dies, his family is going to have to make a decision. They do 
not have the money to pay half of the value of that business to Uncle 
Sam. The salaries that people take out are $48,000, $60,000, some 
approaching $100,000, and in some cases more than that, but most are 
the salaries of any other small business. And bear in mind, half the 
small businesses in this country are women owned. These salaries do not 
generate a whole lot of capital by which you can pay an estate tax. The 
only way you can get the money to pay the estate tax is by selling the 
business on which the estate tax is based. The estate tax doesn't say, 
How much money did you have left over at the time of death? The estate 
tax says, What is the value of the company or the business or the farm 
that you are running? The value of that business is based on the value 
of the equipment and the land, and so on, most of which are probably 
going to be financed and therefore probably already heavily leveraged. 
But that value determines what has to be paid to Uncle Sam--half of it. 
That is why the estate tax is particularly perverse, especially because 
you have to do the liquidation right after the time of death.

  There is an effort by our colleague from North Dakota, who has laid 
down a second-degree amendment here--to ``improve on the existing law'' 
would be the way I think he would characterize it. He does this by 
providing that the exemption we provide in the law, that goes to $3.5 
million, would go to $4 million, as I understand it; and for small 
businesses and farms it would become an unlimited exemption.
  Certainly the sentiment behind that is laudable. The problem is it 
simply will not work. How do we know that? Because we know it currently 
does not work. The law currently provides methods for small business 
people and family farms to get an exemption from the estate tax. The 
exemption today is $1 million. It is going to go up in the future. The 
Senator from North Dakota would make it an unlimited exemption. But the 
problem is even unlimited exemptions are worth exactly nothing if you 
cannot qualify. In other words, there is a door you have to get 
through. There is a gate you have to get through. You have to stay on 
the other side of that or none of this matters, and that is the problem 
with the amendment of the Senator from North Dakota.
  In the business, people referred to it as QFOBI, and I am going to do 
that for the purposes of brevity here, but it is technically the 
family-owned business exclusion. That is the provision of the existing 
law. There are actually two different sections under which people who 
have a small business or farm and who want to be exempted for part of 
the estate tax will try to qualify. But as I said, if you can't qualify 
under this provision, it doesn't matter how big the exemption is, you 
are out of luck. The problem with this QFOBI is it is much too 
difficult and too complex for most people to be able to qualify. I will 
give you an idea.
  For the calendar year 2000, 108,322 estate tax returns will be filed. 
Of course, only 1,470 made the QFOBI election; in other words, about 1 
percent of the total.
  By the way, that number is actually a little higher than in some 
previous years. In 1999, for example, the total number of estate tax 
returns for which the exemption was requested was 173. In 1998, that 
number was 889. My colleague from Texas pointed out that only 32 people 
have ever qualified for a combination of both. But even take the larger 
number we have for the tax year 2000; that is 1,470, and that 
represents about 1 percent of the total of the estate tax returns 
filed.
  If the percentage of people filing estate tax returns is as low as 
our Democratic colleagues for the most part say it is--and although I 
will contest it, let's assume for the moment they are right--it is 
maybe about 2 percent of all taxpayers; and if of that 2 percent only 1 
percent of them qualify for this small business or farm exemption, then 
the amendment of the Senator from North Dakota helps a grand total of 
two one-hundredths of 1 percent of people filing tax returns--two one-
hundredths of 1 percent. The fact is, it doesn't even help that many 
people because QFOBI is recognized as very treacherous for somebody to 
get involved in.

  A representative of the American Bar Association testified before the 
Ways and Means Committee that the provision was simply too complicated 
to be effective. A professor of law at Temple noted that very few 
people would try to meet the qualification because of its complexity. 
The NFIB, which represents a lot of these people, testified

[[Page S5401]]

that qualifying for the family-owned exclusion currently is difficult, 
costly, and complex. Studies by numerous organizations and scholars 
routinely find that family businesses spend exorbitant amounts of 
revenue on lawyers, accountants, and financial planners in order to try 
to do this.
  The reason I say even two one-hundredths of 1 percent is a high 
number is that the reality is, if you try to qualify for QFOBI, you are 
going to find yourself face to face with the friendly IRS.
  The reason is the IRS will look at every one of these filings. They 
will contest a significant number of them. As a matter of fact, in the 
year 2000 there were 149 cases pending, which represents about 10 
percent of the total number that were filed at that time--the total 
number of estate tax returns filed at that time. There are an equal 
number of cases in the administrative process. You first have to go 
through the administrative process, and then you will actually have 
your case taken to court.
  What happens when the IRS challenges these? The IRS wins. As of the 
last time we have statistics, the IRS had won 67 percent of the cases.
  So if you have the courage to try to qualify under this QFOBI 
election, understand you are going to have the IRS question the value. 
It is going to be an administrative appeal. At least 10 percent of the 
cases are going to be in court. And you are going to lose two-thirds of 
the time.
  That is why the group of lawyers that works on these kinds of things, 
the section of the American Bar Association which handles estates and 
taxes, has recommended to their lawyers that they not try to help 
people qualify because it is too risky from a malpractice point of 
view. They have recommended that this particular section be repealed.
  The bottom line is that it doesn't matter whether you have a $1 
million exemption or a $3.5 million or a $4 million exemption or an 
unlimited exemption for small businesses or family farms; if you cannot 
qualify in the first instance, it does you no good. From what we can 
find from IRS statistics, only two one-hundredths of 1 percent qualify. 
That doesn't take into account the challenges by the IRS.
  Let me just make one last point, and then I think there are others 
who would like to speak.
  I am not going to read to you the page after page of complex 
provisions. It is a nightmare to read and understand. I am a lawyer. I 
don't understand it. It takes a real expert to try to figure out how to 
make this work and, as I said, the ABA itself has recommended to its 
members that they approach this with extreme caution.
  One of the problems with the people who qualify is this. Let's assume 
you are one of the lucky two one-hundredths of 1 percent who actually 
qualify and you have gotten through the IRS hurdles. What does this 
mean for you now that you have qualified? Are you home free? Not 
exactly. There is a 10-year period of time in which the IRS can--and I 
love this term--``reach back'' and collect the tax from you.
  There is a lot that can happen that could cause that to occur. If you 
have trouble in your business, for example, and go bankrupt, that is 
tough; as far as the IRS is concerned, they can go back and collect the 
entire estate tax from you.
  But here is what happens even if things go well. The IRS, if you 
qualify--believe me, this is the truth. It seems that it could not 
possibly be, but under the amendment of the Senator from North Dakota 
and the existing law, the IRS has a lien on your property, all of the 
estates that would be subject to the estate tax, for 10 years. And they 
have a first position, which means: Good luck if you want to try to get 
financing for anything. Every small business finances its inventory, 
its machinery. We do not go out and buy a house and pay cash for it. We 
get a loan from the bank or from Fannie Mae, FHA or someone, and we 
finance a home. That is the way small businesses finance their 
operations. But, good luck going to the bank when they know the IRS has 
a first lien for a period of 10 years and the bank only has a second 
position. That is a poor position to be in, and the bank will tell you 
one of two things--either: Sorry, we can't lend you the money or: We 
could lend you the money for 2 or 3 or more percent premium.
  In other words, if you qualify for this provision, you are going to 
have to pay a lot more money if you can get financing in order to 
finance the continued operation of your business. Basically, it is a 
set up for failure. That is why most people do not even try to qualify 
for it. Many of those who try cannot qualify for it. It is an 
extraordinarily complex and ineffective provision. Therefore, with all 
due respect to my friend and colleague from North Dakota, his attempt 
to grant an unlimited exemption for small businesses and farms is 
fatally flawed. Very few, if any, of these small businesspeople or 
farmers are going to be able to qualify. As a result, the amendment is, 
in fact, a nullity, and does nothing to help the very people who all of 
us would like to help.
  I will relinquish the floor at this point and hope as the debate on 
the amendment is concluded that I will have an opportunity to talk 
about the comments that the Senator makes, and also to point out again 
that the people who actually pay this tax are not the kind of people 
you might envision but they are schoolteachers, airline pilots, 
mechanics, librarians, guidance counsellors, and the like, according to 
the IRS itself.
  The PRESIDING OFFICER (Mrs. Carnahan). The Senator from North Dakota 
is recognized.
  Mr. DORGAN. Madam President, inform me of the time remaining on both 
sides.
  The PRESIDING OFFICER. The Senator from North Dakota controls 56\1/2\ 
minutes and the time in opposition is 25 minutes.
  Mr. DORGAN. Madam President, my amendment is cosponsored by Senators 
Durbin, Carnahan, Corzine, and Stabenow.
  Let me respond to some of the discussion we just heard. I have great 
respect for my friend from Arizona. I have listened to him with great 
interest in previous debates about repealing the estate tax. He 
believes passionately that we ought to get rid of the estate tax and 
makes the case for it. But I was reminded when I heard his discussion 
of my amendment of Mark Twain who was asked once if he would be willing 
to engage in a debate. He said: Of course, I would--as long as I can 
take the negative side. They said: We have not told you the subject of 
the debate. He said: It doesn't matter. The negative side will take no 
preparation. It is easy. It is inherently easy to oppose things.
  The way the opposition renders this amendment is almost indescribable 
to me. I am the one offering the amendment. But the interesting 
discussion that incorrectly describes this amendment needs some 
correction.
  Let me begin by talking about why we are here and what this debate is 
about. Then I will describe my amendment.
  We are here because our country, a little more than a year ago, 
decided on a new kind of fiscal policy. Those who seemed to think they 
knew saw surpluses for years and years ahead--surpluses as far as the 
eye could see for the Federal budget. They said that because we have 
all of these surpluses that stack up in the future, let us cut taxes 
and let us do it right now. By the way, they said, let us cut the 
estate tax sequentially so in the year 2010 it will be completely 
repealed.

  It is true that the goofy kind of proposal finally offered and passed 
into law takes the estate tax right up to the repeal in 2010, and then 
reinstates it in 2011. Historians will scratch their heads for some 
while when they evaluate what was done a year ago on estate tax.
  Our colleagues who want to repeal the estate tax forever because they 
said we are going to have these large and continuing budget surpluses 
say, although they wanted to reinstate it in 2011, they now want to 
make that repeal permanent.
  Of course, over a year later, things are different. We don't see 
surpluses as far as the eye can see.
  Yesterday, the Senate had to consider an increase in the debt limit. 
Why? Because surpluses have turned to deficits. The country has an 
economy that is in some trouble. We now have deficits for some years 
into the future. Yet my friends on the other side of the aisle are 
coming to the Senate saying: Oh, by the way. Our urgent priority is to 
permanently repeal the estate tax.

[[Page S5402]]

  Let us evaluate what these priorities are about.
  Do we have a priority, for example, to try to help people at the 
bottom of the economic ladder in this country--people who are working 
for the minimum wage who haven't seen an increase for years and have 
seen the value of that minimum wage eroded? Do we have an obligation to 
them? Is that a priority? No. It is not a priority for some. They do 
not want that question on the floor of the Senate.
  Do we have a priority to see if we can't do something about people 
who do not have health insurance--over 40 million people who tonight 
may find their child is sick, discover they do not have any money in 
their pocket or in their bank account to help take care of their child? 
Do we have a priority to deal with sick children and people who do not 
have the capability of providing health insurance for their children? 
No. That is not a priority for some.
  How about schools? Are schools a priority?
  I have spoken on the floor of the Senate many times about schools. I 
toured a school populated largely by American Indians. But it is a 
public school district. And a little girl in the third grade named 
Rosie Two Bears looked up at me and said: Mr. Senator, will you be able 
to build us a new school?
  Do you know why they needed a new school? Because there are 150 kids 
and two toilets and one water fountain. They were holding classes in a 
basement room in a building that had been condemned long ago. Two or 
three times a week they had to evacuate that classroom because sewer 
gas was backing up in the classroom. Rosie Two Bears wanted to know if 
her Senator could build her a new school. Incredibly, the answer is we 
don't build new schools.
  But the question is, Is education a priority for that young girl and 
others around the country? Not for some--that is not on the floor of 
the Senate.
  This isn't about helping people at the bottom of the economic ladder. 
This is not helping to address the issue of health care costs, or lack 
of health care coverage, or lack of insurance for some American 
families--nearly 40 million of them. This is not about improving 
American schools. No. This issue is different than that. This issue is 
saying, let us permanently repeal the estate tax.
  How narrow is this? Let me describe the amendment I am offering and 
that I offered last year which got 43 votes. Those who now speak loudly 
about the need to repeal the estate tax voted against my amendment last 
year.
  My amendment said the following: It said, let us have a $4 million 
exemption per estate--$8 million for husband and wife. If you have 
fewer assets than $8 million, you pay no estate tax under any 
circumstance.
  My amendment also said, by the way, this issue that the other side 
continually says persuaded them to deal with the estate tax--that is, 
the inability to pass a family farm or a small business from the 
parents to the kids--let us totally repeal the estate tax for the 
passage of a family farm or business. If it is family owned, the 
parents die, and the kids want to keep running it, I say don't 
interrupt the transfer of that business. Let us not have the kids 
inherit a business and a crippling estate tax. Let us allow them to 
inherit the business exempt from the estate tax, if they want to keep 
running it.
  This says no estate tax at all. Repeal it for the transfer of a 
business from parents to children who want to keep running it.
  It is very simple. We will do it in 2003. I offered that amendment 
last year.
  Those who come to the floor of the Senate and say they are persuaded 
to propose a permanent repeal of the estate tax because they care so 
much about family businesses and the transfer of family assets to the 
kids who want to run the business are the ones who voted against my 
amendment. This amendment will provide that repeal next year. Their 
proposal would provide the repeal some 7 years later.
  One wonders whether they care less about this issue and more about 
repealing the estate tax for the wealthiest Americans. Or do they 
really care about family businesses and family farms? If so, this is 
the amendment to support.
  Let me talk a little bit about privilege and those at the upper end 
of the economic ladder.
  I think it is terrific that in this country people do well. In fact, 
we have some innovative geniuses in this country who have done very 
well. One-half of the world's billionaires live here, and good for 
them.

  But let me talk about the question of whether our priority at this 
point--given the kind of Federal budget deficits we have and the kind 
of economic problems we have--ought to be to bring to the floor of the 
Senate a billionaire tax relief package. Because that is what this is. 
This is all about, let's cut taxes for billionaires. And you can 
describe it however you want.
  You can put all kinds of seasoning in it. You can stir it up, boil 
it; you can do whatever you want with it. Just strip it away, it is a 
tax cut for billionaires, when we have very big Federal deficits and 
when we have other priorities that some in this Chamber want to ignore.
  Let me talk about some of these issues. Here shown on this chart are 
people who are going to benefit from the proposal on the floor of the 
Senate to permanently repeal the estate tax. That is why I want to 
amend it, so we don't repeal the estate tax for everybody.
  The chief executive officers of our corporations in this country, in 
1980, made 42 times the amount of money that the average worker made. 
Twenty years later, they made 531 times the money the average worker 
made. That is who is going to benefit from what the minority is 
proposing here today.
  In 1981, the average compensation of the 10 highest paid CEOs in a 
U.S. corporation was $3.5 million. I come from a town of 300 people, a 
small high school class of nine. I happen to think $3.5 million is a 
lot of money. So is $3.5 million a year in compensation. That was 20 
years ago. Do you know what it is today for the 10 highest paid CEOs in 
the country? It is $155 million a year.
  That is who benefits from this tax cut. That is what this debate is 
all about. They say that these folks pay too much in taxes, so they 
want an estate tax repeal even including the highest income earners in 
our country. And they will do that at the expense of all the other 
priorities that exist in this country.
  I say, yes, let's repeal the estate tax for the passage of family-run 
businesses and farms. Let's provide an $8 million threshold for 
families, below which you will pay no estate tax. But if you are 
fortunate enough to have tens and hundreds of millions and billions of 
dollars, I think it is important to understand a couple things.
  One, most of that has never ever been taxed. Most of it comes from 
the growth appreciation on assets and has never been subject to a tax. 
And, yes, I think your descendents ought to get a fair part of that. 
But I also think this country ought to capture part of that and use it 
to invest in our kids, invest in education, invest in the solvency of 
Social Security, invest in the solvency of Medicare, to strengthen this 
country. That is what I think ought to happen.
  Let's talk about compensation just for a minute. I mentioned some of 
the compensation that exists for individuals. I have a chart that shows 
the 1-year compensation in the year 2000. These are the people, 
incidentally, who are the beneficiaries of this proposal. And I guess I 
don't know of a time when I have heard people come to the floor of the 
Senate and say: I know we face a big budget deficit, I know our economy 
is in some trouble, I know we have other priorities--education, health 
care, and other things--but our priority is to provide a tax cut for 
the wealthiest Americans. These figures--$290 million, $225 million, 
$157 million--these are individual compensation numbers in the year 
2000 for people who ran America's corporations. These are the people 
who will ultimately benefit from repealing the estate tax.

  We have a lot of folks out there in this country who are working 
hard, trying to do the best job they can. Look, they are never going to 
pay an estate tax. They are not going to have $8 million, as provided 
under my amendment. But their proposal today is to say $8 million isn't 
enough of a threshold; we need to be able to exempt those who have $20 
billion, those who have $2 billion, those who have $500 million in 
assets, so none of those assets can ever be used to help America's

[[Page S5403]]

children, to invest in America's schools, to strengthen Social 
Security, to strengthen Medicare, and to do the other things we also 
know are necessary.
  So my amendment, as indicated, is very simple. It was described in a 
tortured way by my colleague from Arizona. He said: Well, you know, if 
you try to exempt family businesses and family farms, you run into this 
web of complexity. A web of complexity, he calls it. So the result is, 
we have to exempt from the estate tax billionaires in order to solve 
the issue of family farms and family businesses? I don't think so. I 
think if you go into any store in the county, they call that a bait and 
switch.
  You come out to the floor of the Senate and say: Look, our mission is 
very simple. Our mission is in support of family farms and small 
businesses. That is what we are trying to do, to get rid of the 
crippling estate tax that exists on the transfer of a business or a 
farm from the parents to the kids. I say, if that is your mission, then 
I am with you.
  Let's repeal the estate tax for the transfer of that property. The 
kids want to run the business? It is fine with me. I don't think we 
ought to shut the business down. I don't think we ought to load the 
business with an estate tax debt. I think the parents ought to be able 
to move that business to the kids upon the death of the parents with no 
estate tax obligation at all. And that is what my amendment does.
  No amount of arm waving in this Chamber can obscure the fact that we 
have an exemption that is workable. It has only been in existence since 
1997, I might say. It was described as QFOBI, which is an acronym. We 
use too many acronyms in this town. The fact is, if you have spent the 
last couple of years of your career talking about protecting small 
businesses and family farms, and its passage to the kids, then don't 
vote against this amendment and say to folks back home: Oh, by the way, 
it was too complicated.
  This amendment I offer does two things. It provides an $8 million 
unified credit threshold for a husband and wife, below which there is 
no estate tax. It is repealed for everybody below $8 million in assets, 
husband and wife. And second, and most important to me, is that family 
businesses, regardless of size, if transferred to the kids--and if 
those kids continue to run those family businesses--will be exempt from 
the estate tax; and, no, not in 2010, but in 2003.
  You see, the problem with the proposal offered by the other side, 
first of all, is they propose a complete repeal, but it just kind of 
dribbles along, as with most of their proposal; they just dribble it 
out over a period of time. If it is worthy to say, let's not interrupt 
the transfer of a family business, so the kids can continue to operate 
it without an estate tax obligation--let's do it next year. If you 
don't want to do it next year, then vote against our amendment, but 
don't you go home and say you stood for family businesses and family 
farms. Don't you dare do that, because voting against this amendment, 
just as many of you did last year--we got 43 votes in favor--voting 
against it is to say to folks back home: No, I want you to wait 7 or 8 
years for the relief that was offered permanently in this amendment for 
family businesses and family farms.

  Ms. STABENOW. Will my friend from North Dakota yield?
  Mr. DORGAN. I am happy to yield.
  Ms. STABENOW. I thank the Senator.
  I rise to thank my colleague for this amendment. And I join him. I am 
very proud to be a cosponsor of this amendment. I appreciate very much 
what he is doing.
  It seems to me, as we have looked at this issue to find the right 
balance, that this amendment is in fact the right balance. It says that 
we will say to our family farmers and family-owned businesses--of whom 
we have many in Michigan--that we want to make sure, after you have 
worked hard and your family has been able to develop a good business or 
family farm, that if you want to pass that along to your children, you 
will be able to do that and that it not be jeopardized in any way. That 
makes perfect sense to me. I support repeal for family-owned 
enterprises.
  I think it also says that we are going to set a limit, we are going 
to set priorities for the country, so when we are talking about a 
billionaire versus having the resources for seniors or families to be 
able to afford prescription drug coverage--which is also a tax, I would 
argue a significant tax, on our seniors and our families--or whether it 
is looking at the priority of educating our children, we are going to 
have a balance, and those who are the top billionaires in this country 
ought to contribute to national defense and the war on terrorism and 
education and health care, and so on.
  So I wonder. I would just ask my friend from North Dakota a question. 
It is my understanding that our amendment would in fact exempt 99.5 
percent of all of those who might pay the estate tax. Is that correct?
  Mr. DORGAN. The Senator from Michigan is correct. Well over 99.5 
percent will no longer have to pay an estate tax. But even that is not 
enough for those who insist on complete repeal. Those who insist on 
complete repeal are saying--during a tough time, where we have Federal 
budget deficits and other priorities that we can't fund--they are 
saying: This is our priority. The top of the heap. Those at the very 
top, the billionaires, the $100 million per year executives, that is 
our priority. We believe that our priority is to exempt those estates 
from an obligation.

  The Senator from Michigan is right. Over 99.5 percent of estates will 
not be subject to an estate tax.
  When the Senator from Arizona was present, he said this issue called 
QFOBI, which is the method by which you value the assets of family-
owned businesses, is totally unworkable. The Center on Budget and 
Policy Priorities says that businesses can easily qualify for this 
special status as long as the family owns and operates the business and 
intends to continue to do so.
  Let's say you have a $200 million family business, a big one. In my 
judgment, if it is family owned, it goes to the lineal descendants. If 
they want to continue to operate it, no tax. We repeal the estate tax 
for that transfer. If, however, there are not lineal descendants who 
want to operate it--one lives in California and one in Florida, one in 
Texas--and they want to sell the assets, they have the same $8 million 
exemption that we would provide in this amendment.
  The Senator from Michigan is correct. This affects very few estates. 
They are only the largest estates, and that is what we are fighting 
about.
  We have people here saying: That is our priority, tax exemption, tax 
relief for the highest income earners in our country at a time when we 
have so many other priorities.
  Ms. STABENOW. If I might again say to the Senator from North Dakota, 
I thank him on behalf of Michigan family farmers and small family-owned 
businesses, as well as large family-owned businesses, for putting 
forward what I believe is, in fact, just the right balance. We say to 
our family-owned enterprises, we want you, if you have worked hard all 
your life, to be able to pass on that business, that farm to your 
family. We want to make sure you are not paying the inheritance tax. 
But at the same time we say to middle-class families and seniors and 
everybody else in the country that we are going to make sure your 
priorities, those that affect the majority of Americans, will be funded 
before we, in fact, give a tax cut again to the top half a percent of 
the public, the top billionaires of the country.
  It is the right balance. It is the right set of priorities. I thank 
my friend. I appreciate the opportunity to join with him in his 
amendment.
  How much time remains on my side?
  The PRESIDING OFFICER. The Senator has 35\1/2\ minutes.
  Mr. DORGAN. I reserve the remainder of my time.
  Mr. GRAMM. Madam President, how much time do we have?
  The PRESIDING OFFICER. The Senator has 25 minutes.
  Mr. GRAMM. Let me take 5 minutes of it. Then I will yield to the 
Senator from Colorado.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. GRAMM. Madam President, facts are persistent things. The good 
thing about fiction is you can always have it the way you want it. If 
you make it up, it can always be good, if you are for it. It can always 
be bad, if you are against it. But facts are persistent things.

[[Page S5404]]

  In 1997, recognizing that we had confiscatory taxes on small 
businesses and family farms upon death but not being willing to repeal 
the death tax, which our Democrat colleagues are not willing to do--the 
only vote we are going to have today that would repeal the death tax or 
would change the death tax, the only one that would go to the President 
to be signed today is the one I will offer--wanting to get credit for 
helping without helping, we adopted a provision called 2057. That is 
the closely held family business exemption.
  Our colleague says: We will expand it so it will cover every small 
business, every family farm.
  It has been in effect for 5 years. How many farmers and ranchers do 
you think have qualified for this protection in 5 years? In 5 years 
that this provision of law has been in effect, only 33 farm and ranch 
families have qualified.
  This bill that is being offered as an alternative to the real repeal 
of the death tax is not about 33 families. It is about protecting 40 
Senators by giving them a fig leaf when they vote against repeal of the 
death tax.
  The plain truth is in 5 years of being in effect, this provision has 
afforded relief to 33 farmers and ranchers. And why? It is 17 pages of 
single-spaced requirements. It gives the government a lien against your 
property for 10 years. It sets up requirements like ownership of assets 
for at least 8 years, when if you are growing chickens, they don't live 
8 years.
  The bottom line is, this is absolutely unworkable and meaningless 
except for fewer taxpayers than we are going to have Senators vote 
against repeal of the death tax.
  I go back and make my point: Our colleagues know this is an issue 
that Americans care about. They desperately want to spend the money we 
are collecting by making people sell their farms, sell their businesses 
upon the death of the founder in order to give the government 55 cents 
out of every dollar they have accumulated in their lifetime. But rather 
than repeal the tax so that this absolute tragedy and theft could stop, 
this outrage could end, they are offering basically a proposal that has 
proven to be unworkable.
  When it gets down to the bottom line, the question before us is a 
very simple one: Do you think it is worth making people sell their 
business, sell their farm, sell off the product of their life's work to 
give government 55 cents out of every dollar they have accumulated, 
even though every dollar they have accumulated they have paid taxes on, 
so that Government can spend that money? Or do you think it would be 
better to let people keep the money and eliminate the situation where 
death is a taxable event? That is the question before us.
  There is only one real repeal. I have been around the track before. I 
have seen it. I know what is going to happen here. We are going to have 
a bunch of people who are going to vote to sustain this point of order 
so that even though we have a majority who want to repeal the death 
tax, we won't be able to do it today. But they are going to vote for 
these proposals where only 33 farmers and ranchers in 5 years have 
qualified, and they are not outside the 10-year window. They may not 
end up qualifying.
  They are going to go back home and say: Look, I wasn't against 
repealing the death tax. I just was against their repeal of the death 
tax.
  There is only one real repeal, and that is the one that passed the 
House.
  I yield 5 minutes to the Senator from Colorado.
  The PRESIDING OFFICER. The Senator from Colorado.
  Mr. ALLARD. Madam President, I thank my colleague, the Senator from 
Texas, Mr. Gramm, and my colleague from Arizona, Senator Kyl, for their 
tremendous effort in working on eliminating the death tax.
  I rise in opposition to the Dorgan amendment and in support of the 
Gramm amendment which is the provision that was passed out of the House 
of Representatives last week. Fundamentally, if we want to help farmers 
and ranchers, if we want to help small businesspeople, we need to kill 
the death tax. It is a sham to put in qualifiers and provisions so that 
such a small number of small businesspeople can qualify instead of 
eliminating the tax altogether.
  What we need to do is to kill the death tax. This unfair tax has been 
a concern of mine for some time. I have previously introduced my own 
legislation to eliminate the death tax. I was pleased to support the 
repeal of the death tax as part of last year's tax relief package. But 
those cuts simply do not go far enough.
  One of the tenets of a fair tax system is that income is taxed only 
once. I know this argument has been made a number of times by my 
colleagues. These small businesspeople, farmers and ranchers, families 
are subjected to a tax that is initiated at the time of tragedy in the 
family, an event when somebody passes away. This is money on which the 
taxpayer has already paid taxes. Income should be taxed when it is 
first earned or realized. It should not be repeatedly taxed by the 
government.
  The death tax simply violates this tenet. The way I see it, it comes 
down to one question: Should death be a taxable event? I emphatically 
believe the answer is no.
  People who work hard and save throughout their lifetime should be 
able to expect that the products of their labor will go on to help 
their family, not go on to fund some politician's pet project.
  This issue of the death tax really hits home for me. Family farms and 
small businesses are two of the groups most affected by the estate tax. 
I grew up on my family's ranch in Colorado, and I owned a small 
business before I came to Washington. So I truly understand the 
concerns of those who live in fear of the impact that this tax will 
have on their legacy to their children.
  The estate tax has resulted in the loss of family farms and family 
businesses across the Nation. Many people work their entire lives to 
build a business that they can pass on to their children. When these 
hard-working businessmen and farmers pass away, their families are 
often forced to sell off the business to pay the estate tax.
  I see this as an affront to those who try to pass on the fruits of 
their life's work to their children. America was founded on 
entrepreneurship and hard work, and a high death tax serves to stifle 
both.
  The people affected by this tax are not necessarily wealthy. Many 
small businesspeople are cash poor but asset rich. For example, the 
owner of a small restaurant might have $800,000 of assets but not much 
cash on hand. Her children will still have to pay an excessive tax on 
the assets.
  The produce wholesaler, who has invested all of his revenue in trucks 
and storage, might have more than $700,000 in assets. That does not 
make him a cash-wealthy man. Yet he is still subject to this so-called 
``tax on the wealthy.'' In too many situations the heirs must dismantle 
or sell a family business simply to pay the taxes. This isn't right.
  The death tax also impacts employment and the economy. When a family-
owned farm or a small business closes, the workers lose their jobs. 
Conversely, leaving resources in the economy can create jobs. In fact, 
in a 1995 Gallup Poll, 60 percent of business owners reported that they 
would add more jobs over the coming year if the death tax were 
eliminated.
  Additionally, the estate tax is a disincentive for Americans to save 
their earnings. The government has created a number of tax breaks and 
other incentives for those who save their money: 401(k)s and IRAs--to 
name a few. Yet the estate tax sends a contradictory message. 
Basically, it says, ``If you don't spend all your savings by the time 
you die, the government will penalize you.'' This tax is no small 
penalty, either. We are talking about some very high tax rates.
  The death tax also represents an unjust double taxation. The savings 
were taxed initially when they were earned. Then, when the saver passes 
away, the government comes along and takes a second cut. There is no 
good reason for the current system--other than the government's desire 
to make a profit.
  The current death tax law has a greater effect on the lower end of 
the scale than the higher. Wealthy people can afford lawyers and 
planners to help them plan their estate. Those at the lower end of the 
estate tax scale are often unable to afford sophisticated estate 
planning. So the current law also makes the tax somewhat regressive, 
which is not fair. This is particularly

[[Page S5405]]

true given the uncertainty of the tax due to phase in and sunset dates.
  Planning and compliance with the estate tax can consume substantial 
resources. The National Association of Manufacturers has reported that 
more than 40 percent of its members have spent at least $100,000 on 
death tax planning. For three out of five members the annual compliance 
costs are more than $25,000. This is money that could have been better 
spent to expand the business and create new jobs--rather than dealing 
with the death tax.
  The estate tax only raises 1 percent of Federal revenue, yet it costs 
farms, businesses, and jobs. No American family should lose their farm 
or business because of the Federal government. I support full permanent 
repeal of the Federal estate tax.
  I urge my colleagues to end this unfair system and join me in 
supporting permanent repeal of the death tax.
  Mr. DORGAN. Madam President, I yield 10 minutes to the Senator from 
Illinois.
  The PRESIDING OFFICER. The Senator from Illinois is recognized.
  Mr. DURBIN. Madam President, I am happy to stand as a cosponsor of 
the amendment by Senator Dorgan and Senator Carnahan of Missouri. 
People who are following this debate in our Chamber and by C-SPAN must 
wonder what we are doing today. We are talking about tax cuts, tax 
breaks, tax relief.
  Can you think of a more popular issue or subject for us to entertain 
on the floor of the U.S. Senate? Forget for a moment that we are in 
deficit, that we are taking billions of dollars out of the Social 
Security trust fund because of our last tax decision and events that 
have intervened. Forget that for a moment and just concentrate on tax 
relief for America.
  If you would go out on the street corner in Springfield, IL, or in 
Chicago, which I represent, or in Texas or in North Dakota, and say to 
the first five people walking by: If Congress is going to consider tax 
relief and tax cuts, what do you think they ought to concentrate on? I 
guarantee you not a single soul will come up to you and say: What they 
ought to concentrate on are the multimillionaires who may pass away and 
owe some money to the Federal Government; that is the thing that keeps 
my family up at night. We are worried about that possibility--that 
someone who is worth millions of dollars may end up paying some money 
to the Government.
  No. Most people would say: I will tell you what bothers me, Senator. 
I cannot figure out how to pay for my kids' college education expenses. 
Why don't you make that deductible? That would help my family and would 
help our country. That makes sense, doesn't it?
  If you went into the store on the corner and said to the 
businessperson at the store: What do you think is a good tax relief 
measure for Congress to consider? They might say: I am not sure how you 
do it, but can you help me pay for health insurance for my wife, 
myself, and my employees? It is killing me, going up 25, 30 percent a 
year. There is another interesting idea for tax relief.
  Then you go to the other corner and stop by a senior citizen 
gathering and say: Do you have any ideas for something we can do by way 
of tax relief? They will probably say: Senator, can you do something 
about the high cost of prescription drugs in this country? We cannot 
afford to fill the prescriptions the doctors give us.
  There you have it--three proposals you are likely to find in any city 
or town in America to deal with real American family problems, such as 
paying for a college education, paying for health insurance, affording 
prescription drugs. You might ask yourself, of all the possibilities, 
why is Congress focusing instead on tax relief for the wealthiest 
people in the country and ignoring the tax relief that the average 
person in America would like to see us enact? The reason is because the 
special interest groups have been at work.
  First, they hired the pollster who decided to stop calling it 
``estate'' tax and start calling it a ``death'' tax. People think that 
is terrible that you are going to tax someone for dying. Well, look at 
the Senate floor here. Look at the other side. The poster says: 
``repeal the death tax.'' So they caught on. From now on it is no 
longer the estate tax, it is the death tax.
  And then they said you have to convince everybody in America that 
this is a tax they have to worry about. Forget for a moment that it is 
only a handful of people who ever pay the Federal estate tax. I went to 
O'Hare Airport a few months ago when we were in the middle of an 
earlier debate on this issue. This is a true story. The baggage handler 
for United Airlines who took my bags at the sidewalk said to me: 
Senator, would you do something about this death tax? I almost said to 
him: Sir, there is no way in your lifetime, even if you win the 
lottery, that you are likely to ever pay the Federal estate tax. What 
you ought to think about is getting your kids through college, health 
insurance, prescription drugs for your mom and dad. Those are the 
things that will affect your life.
  They have done very well here. They have convinced the average person 
in the street that the Government is standing by the funeral home 
waiting to slap a lien on the car of the widow. It just is not true.
  Let me tell you something else they are arguing. They are arguing 
that this is a tax that is destroying farmers and small businesspeople, 
that they are taking away a farm that has been in a family for 
generations because of the estate tax.
  I wrote a letter to the Illinois Farm Bureau and the Farmers Union 
last year and said: Can you give me one example of a farm in the State 
of Illinois--just one example--of a farm family who lost their farm 
because of the Federal estate tax? No; none, zero; not one example. 
Senator Dorgan and I came together with Senator Carnahan and said: 
Let's go after real estate tax reform that solves any problems we can 
envision. I salute Senator Dorgan for his leadership because he said: 
Why don't we just flat out exempt any farm, any business that is going 
to be transferred from one family member to the next? Let's just say 
they will not pay any estate tax. That puts it into the argument that 
this is confiscating businesses and farms.

  The amendment is very simple. It is very straightforward. Guess what. 
It takes effect next year. It is immediate. So all of those who vote 
against the Dorgan amendment are saying, postpone this and for 7 years, 
leave businesses and farms in the lurch, if there is one, when it comes 
to estate tax liability.
  Senator Dorgan put together this amendment, which I cosponsored, 
which says farms and businesses which pass to lineal heirs--children--
are not going to pay any estate tax. That is as clear as it can be, and 
it goes into effect immediately.
  Then he says: Let us increase the exemption for other estates from 
what will be about $1 million to $4 million for individuals, $8 million 
for married people. What would that cover?
  Let's assume you bought a home that has dramatically appreciated in 
value. I have seen it in Illinois, Washington, California, you name it, 
and you have an estate that is left over that has a value of over $1 
million. The Dorgan-Durbin-Carnahan amendment will exempt your estate 
from paying any Federal taxes, $4 million for an individual, $8 million 
for a couple.
  Yet the Republicans have said that is not nearly enough. Madam 
President, you know who they are protecting? It is not a farmer. It is 
not a businessperson. It is not a person who has really done pretty 
well in life. It is the superrich.
  The Senator from Texas called the estate tax an absolute tragedy and 
theft--theft. The Senator from Colorado then said: Why should death be 
a taxable event? Let me ask a question: Why should work be a taxable 
event? People who get up every morning and struggle in the workplace at 
their job pay income taxes. We pay taxes on sales, on income, and other 
items in our society so we will have enough money to make sure the 
Department of Defense can defend America, so there are hospitals, 
highways, and schools that add to the quality of life of our country.
  I will tell my colleagues what we are going to do: If the Republicans 
have their way and eliminate the estate tax for the superrich in 
America, they are going to put a greater burden on taxing work in 
America. They will push more

[[Page S5406]]

of that burden right down to the working person, the average working 
family. That is not fair. It is totally unfair.
  If this Senate is going to address real tax reform, we should at 
least be fair in the way we address it and not make certain that the 
wealthiest people in this country are always the first to benefit from 
tax relief. This debate ignores the average person, the average family, 
and the average business and farm in America.
  This debate is about protecting the superrich who have their voices 
on the floor of the Senate and in the hallways right outside all lined 
up. They come here in their Gucci loafers and their fine tailored 
suits, and they put in these amendments to protect the superrich.
  Meanwhile, day in and day out, the average person, the average family 
in America works hard and worries about paying the bills. Why in the 
world are we doing this?

  To call this an absolute tragedy and theft is to ignore the fact that 
eliminating the estate tax on the wealthiest people in America will 
create a theft on our Treasury, it will create a theft on the working 
families of this country.
  Do my colleagues want to know what the highest tax priority ought to 
be in our country? The highest tax priority ought to be on working 
families, and we are not doing that today. We are ignoring working 
families. We are trying our best to preserve the very best for the 
wealthiest of our country.
  I am happy to support this amendment. I also want to indicate, we 
took a little survey since 1990 of all the times the estate tax issue 
has come to the floor of the Senate. It goes on for hundreds and 
hundreds of occasions.
  We have a chance today with the Dorgan amendment to do something that 
finally puts this to rest. We do it in a sensible way. We do not raid 
the Treasury and we do not say 10 years from now we are going to 
jeopardize the Social Security trust funds so we can give a favor to 
the wealthiest people in this country.
  It is interesting, when this debate got underway, some of the 
wealthiest people said: Stop, I don't need your tax relief; I am doing 
just fine, thank you. That does not dissuade those on the Republican 
side of the aisle from pushing this idea and saying: If we are going to 
give any kind of break in America, it should go to those well off.
  I have been reading what has been going on in terms of corporate CEOs 
who are waltzing away with millions of dollars from these corporations 
even when the corporations are failing. These are people worth tens of 
millions, hundreds of millions of dollars, the very people the repeal 
of the estate tax is designed to protect. Do you have a lot of sympathy 
in your heart for some of these CEOs who have falsified their business 
records, who have been guilty of the worst corporate irresponsibility? 
My sympathy goes with the working families, and my support goes for 
this amendment.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRAMM. Madam President, I yield 5 minutes to the Senator from 
Missouri.
  The PRESIDING OFFICER. The Senator from Missouri.
  Mr. BOND. Madam President, I thank my good friend from Texas. I say 
to my colleague from Illinois, if the wealthiest people say not to 
bother repealing the death tax, it is probably because it does not 
bother them. A lot of the wealthiest people do not really worry about 
the death tax. If you have enough money, it does not matter what you 
would pay. Most of them can spend hundreds of thousands and millions of 
dollars to avoid the death tax.
  By and large, the people who are paying the death tax are not the 
very wealthy. They are hard-working people, many of them educators, as 
my colleague from Arizona has pointed out. But there are an awful lot 
of farmers and small businesses.
  I have spent a good deal of my time in my service in the Senate 
listening to farmers and owners of small businesses. In fact, that is 
where I get most of my ideas. That is where we got the idea to 
strengthen the regulatory relief for small businesses and to provide 
the assistance we give to farmers to open up markets abroad.
  We have talked about regulatory relief, and we have provided a number 
of areas of tax relief, but one of the issues that is the top priority 
for the farmers and the small businesses in my State is getting rid of 
the death tax. These are not the wealthiest people. These are people 
who fear that what they have worked hard to save, to put away, to leave 
to their children, is going to be taken away by the tax collector.
  This morning we had a news conference. We were joined by Brad Eiffert 
of Columbia, MO. He owns Boone County Lumber Company. He and his 
brother work in a business that their father started. They have a very 
successful business with 30 employees. They have worked hard, and they 
have a great deal of equipment used in their business.
  They want to continue the business after their father passes on, but 
they have found that, because of the investment in the equipment, they 
will have to pay a tremendous estate tax. So now each year they take 
out of that business almost $60,000 for insurance premiums to pay the 
tax man. This is money that could be going to the employees, it could 
be going to buy new equipment, or it could be going to build the 
business in many ways. They really want to get rid of the death tax.
  Farmers I have talked with have told me that they have spent over 
$100,000 in lawyers fees and accountants fees trying to figure out how 
to get around the tax. The lawyers get the money, the accountants get 
the money, and they hope that the Federal Treasury will not get the 
money. They have to spend a lot of money, that they should be putting 
back in their farm, to figure out how to avoid this tax.
  So what they avoid does not come to the Treasury, but there is a 
heavy planning cost on how to get away from paying the estate tax that 
is paid by small businesses and farmers.
  Before us we have an amendment which says we are going to expand 
section 2057 of the Internal Revenue Code, the Qualified Family-Owned 
Business Interest exclusion, QFOBI, I guess is what it is called. My 
colleagues propose to make it bigger, better, longer, and stronger, but 
in 2000 only 1.3 percent of family-owned businesses applied for this 
2057 exemption.
  There are people saying we are going to allow you to save small 
businesses and farms from the estate tax through this provision, but 
the provision does not work. In short, a flat tire cannot be made to 
roll simply by making it bigger. This 2057 exclusion is too complicated 
to provide widespread relief to estates harmed by the death tax.
  As my colleague from Arizona has pointed out, it is so complex that 
the American Bar Association urges its tax lawyers not even to try it 
because it is so filled with traps and so many Catch-22s that they can 
get sued for malpractice if they try to use it.
  In order to qualify, the business must constitute at least 50 percent 
of the estate's value. The decedent must have owned and been actively 
involved in the family business for at least 5 of the 8 years leading 
up to his or her death. Following the death of the owner, the heirs 
must continue to participate in the business for at least 10 years.
  But once the business is transferred, the estate tax deferred by 
receiving this designation hangs over the business for at least 10 
years, and the IRS has a first position lien on the property. So the 
small business cannot borrow money without going to a loan with a 
secondary position, if they can even get one. Moreover, such loans cost 
them more.
  If the business goes bankrupt and they cannot continue it, then the 
IRS goes back and gets the entire estate tax. One hundred percent could 
become due with interest. Not surprisingly, there are not many people 
who are willing to play this kind of Russian roulette.
  If this amendment were to become law, I can only imagine the 
insurance premiums that would be required.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. BOND. We need to kill the estate tax and keep it dead and not let 
it spring back. That is what farmers and small businesses in my State 
want.
  The PRESIDING OFFICER (Mr. Reed). Who yields time?
  Mr. DORGAN. Mr. President, I yield 10 minutes to the Senator from 
Missouri.

[[Page S5407]]

  Mrs. CARNAHAN. Mr. President, I am pleased to offer this amendment 
along with my good friends, Senators Durbin and Dorgan. Our amendment 
will, as of January 2003, permanently exempt all small businesses and 
family-owned farms from the estate tax.
  Let me repeat that because I do not want there to be any confusion. 
The Dorgan-Durbin-Carnahan amendment will eliminate the estate tax 
burden on all small businesses and family-owned farms effective January 
2003.
  The estate tax is having an impact that was never intended when it 
was first enacted. Those in line to inherit family-owned businesses and 
farms are having to sell them to pay the estate tax. That is not right. 
Parents who work hard for their whole lives building up a business want 
to pass the fruits of their labor on to their children. The same is 
true of farmers. We want family farms to be passed through the 
generations. We want children to be able to farm the land farmed by 
their parents and possibly their grandparents before them.
  The amendment that Senator Dorgan, Senator Durbin, and I are offering 
today would allow just that. It would ensure no family-owned business 
would ever have to be sold to cover estate taxes. So perhaps one is 
asking: What is the difference between our amendment and Senator 
Gramm's amendment? Well, there are big ones. First, Senator Gramm's 
amendment does nothing for family-owned enterprises until 2011. Under 
the Gramm amendment, they will have to continue to pay estate taxes for 
the next 7 years.
  Our amendment would end estate taxes on family-owned farms and 
businesses beginning next year. We have heard today concerns that the 
exclusion for family businesses is complex. I am more than willing to 
work with my colleagues to improve the family business exclusion, and I 
welcome their support for our proposal to truly protect family farms 
and businesses.
  Our amendment would also relieve family-owned enterprises from the 
burden of estate planning. Since there would be no estate tax, there 
would be no need for estate planning. Under Senator Gramm's amendment, 
the full estate tax will remain in effect until 2010. So family-owned 
enterprises would still have to pay a lawyer and an accountant to 
prepare for the possibility that they may be subject to the tax.
  The other key difference is that Senator Gramm's amendment would 
permanently eliminate the estate tax for multibillionaires. I do not 
believe this is good policy. The Gramm amendment would cost 
approximately $740 billion over 10 years and trillions of dollars in 
the decades after that.
  Ironically, the amendment would go into effect at the time the baby 
boomers will start to retire. So as the number of people drawing on 
Social Security and Medicare starts to increase dramatically, the Gramm 
amendment would be draining the funds necessary to support these 
programs. At a time when we are running budget deficits and Social 
Security and Medicare funds are being used to pay for other programs, 
it is not wise to take any action that would threaten the solvency of 
these programs.
  Who would the Gramm amendment benefit? The tax cut passed last year, 
which I supported, eliminating the tax on estates of less than $3.5 
million, and our amendment would extend this provision permanently. By 
2009, estates worth less than $4 million would owe no estate tax. There 
are very few American families who have to worry about having estates 
of more than $4 million. I only wish there were more of my constituents 
who had this problem.

  In reality, the very wealthiest Americans would benefit from the 
Gramm amendment, but the programs that middle Americans rely on for 
their retirement security would be harmed, as would our ability to 
provide a much-needed prescription drug benefit for seniors.
  So the choice is clear. If we want to make sure that parents will be 
able to pass their businesses and farms down to their children and we 
want to provide this relief right now, not in 2011, and we want to do 
this in a way that does not threaten the long-term solvency of Social 
Security and Medicare, we should vote for the Dorgan-Durbin-Carnahan 
amendment and against the Gramm amendment.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. DORGAN. Mr. President, how much time remains on each side?
  The PRESIDING OFFICER. The Senator from North Dakota has 19\1/2\ 
minutes. The Senator from Texas has 6 minutes 20 seconds.
  Mr. DORGAN. Mr. President, let me make a couple of additional 
observations, and I suspect the Senator from Texas will wish to 
conclude his comments after which I will conclude mine.
  The Senator from Texas said a while ago that facts are stubborn, and 
that is true. Facts are also sticky. They tend to hang around a fair 
amount.
  Let me describe a few facts about this debate, and this issue. 
Despite all of the tap dancing around this issue, our amendment would 
say to farms and businesses in this country that if you are passed to 
the kids who will keep running it following the death of the parents, 
we will repeal the estate tax for that transfer effective next year.
  My colleagues have said we would like to repeal it as well, and 
repeal a lot more for that matter, but we will do that 7 years from 
now. We will start 7 years from now with our complete repeal.
  If it is, in fact, a priority, why would they not do it effective 
January 1 of next year?
  In addition, we have heard some discussion about the fact that this 
family-owned business exclusion does not work. The fact is, it has been 
used a fair amount. It is fairly new, but it is interesting to me that 
the proposal by the Senator from Texas and others last year to repeal 
the estate tax also repealed in their legislation the family-owned 
business deduction in 2004. They are the ones who decided that they 
were going to repeal the family-owned business deduction in 2004.
  What they also came up with last year, I suspect we will not hear 
anyone defend because it is almost the sort of thing that you are going 
to put in material for comedians.
  They came up with a tax plan that says, We will gradually repeal the 
estate tax from now until the year 2010, at which point it is repealed. 
In 2011, we will reinstate it. They are saying to the American people, 
by the way, if anyone has a notion of planning your death, make sure 
you die in 2010 because that is the only year in the next 10 or so 
years when there is a complete repeal of the estate tax.
  I don't know what pencils they used. I don't know what assistance 
they had or consulting advice they received when in a closed and dark 
room someplace they decided to repeal the estate tax gradually over 10 
years and then bring it back in the 11th year. And, by the way, in 
doing so, we will in 3 years----
  Mr. KYL. I say to the Senator from North Dakota----
  The PRESIDING OFFICER. The Senator from North Dakota has the floor.
  Mr. KYL. The Senator from North Dakota suggested this was done in a 
dark room.
  The PRESIDING OFFICER. Does the Senator yield?
  Mr. DORGAN. Let me say by unanimous consent, the room was not dark. 
The room was not dark.
  In addition to creating this comedic approach to tax relief, they 
decided in 2004 they will repeal the family-owned business deduction. 
Those who say they are on the floor of the Senate to help family 
businesses and family farms are the very ones who stuck in their bill 
last year a repeal of the family-owned business deduction in 2004. You 
can make one of two points, but not all at the same time. You can say, 
as they say incorrectly, that the family-owned business deduction does 
not work. If that is the case, they probably should have repealed 
immediately. But they are saying it does not work so we will let it 
continue not to work and repeal it later. I suppose this is also great 
material for comedy but a pretty poor excuse, in my judgment, for sound 
tax policy.
  Strip away all of the leaves and ask the question, What are the 
issues? Simply, they are these:
  I propose an $8 million unified estate tax exemption for a husband 
and wife. If you do not have assets equalling $8 million, do not worry, 
you will never have an estate tax obligation. That is No. 1.
  No. 2, I propose a total repeal of the estate tax in 2003 for the 
passage of a

[[Page S5408]]

family business or a farm to the kids who want to continue to run it. 
If the parents die, and the kids want to run that operation, I say good 
for them. The last thing in the world we want to do is interrupt that 
with an estate tax obligation. It is repealed for such businesses, 
regardless of size. We do that January 1, 2003.
  The proposal to repeal the entire estate tax means we are fighting 
over what is left, No. 1; and, No. 2, we are fighting over when we will 
give relief to family-owned businesses and family-owned farms.
  Last year, they decided to take away in 2004 the family-owned 
business deduction. Now they are saying they are fighting to help 
family businesses.
  A strange fight, I would say: Try to take away their deduction; you 
did, in fact, in law, in 2004; and now you want to stage this so they 
get relief 7 years from today. If it is important, how about relief 
immediately? How about saying if it is important for businesses and 
farms to stand up and do it now? That is what my amendment does.
  This is bait and switch. We all understand bait and switch and have 
seen it in stores from time to time. This is bait and switch in 
legislation.
  I will speak at the end about priorities because we have people 
saying this is the most important thing for us. Yes, we have a big 
deficit. Yes, we have economic trouble. But our most important priority 
at this point is providing a repeal of the estate tax for the largest 
estates in the country? I am talking about estates worth $500 million, 
$1 billion, $2 billion, $20 billion. That is the biggest priority? That 
is the highest priority we have in this country? We have Social 
Security issues, Medicare issues, education issues, a whole series of 
things we ought to attend to, but the highest priority is providing a 
repeal of the estate tax for the top estates in the country?
  I think not. One of the priority ought to be to do what I do in this 
amendment: Have a thoughtful exemption, $8 million, husband and wife, 
below which there will be no estate tax obligation any longer, under 
any circumstance, and allow almost immediately, on January 1 of next 
year, the passage or transfer of a family business or family farm to 
the descendants who want to run the business or farm without an estate 
tax obligation. That is my amendment.
  Do not vote against this amendment and go home and say, by the way, I 
am the champion of the business and farm that is family owned. This is 
the way to champion their interests if you want to repeal the estate 
tax obligation of the transfers, effective January 1.
  How much time remains?
  The PRESIDING OFFICER. The Senator from North Dakota has 11 minutes.
  Mr. DORGAN. I reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. I ask unanimous consent that the quorum call I am about to 
ask for not be charged against either side.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill 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. Without objection, it is so ordered.
  Mr. REID. Mr. President, I ask unanimous consent that upon the 
disposition of the Dorgan amendment, which should be in the next 15 or 
20 minutes, the Conrad amendment be set aside and that Senator Gramm or 
his designee be recognized to offer his first-degree amendment, as 
provided under the parameters of the agreement governing H.R. 8; that 
upon the conclusion of the debate with respect to the Gramm or designee 
amendment, the amendment be set aside, and the Senate resume 
consideration of the Conrad amendment No. 3831, and there be 5 minutes 
of debate equally divided and controlled in the usual form; that upon 
the use of time, the Senate vote in relation to the amendment; that 
upon disposition of the Conrad amendment, the Senate resume 
consideration of the Gramm amendment, and there be 5 minutes of debate 
equally divided and controlled in the usual form; that upon the use of 
time, the Senate proceed to vote in relation to the amendment without 
further intervening action or debate; and provided further that no 
other second-degree amendment be in order.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, for the information of Members, we are going 
to have a vote very shortly. Then we will have an approximately 2-hour 
debate on the Gramm amendment. Then we will have two votes following 
that. That should end the debate on this matter, I hope, for the day--
and for the year, maybe.
  I have nothing more to say at this time. I think this is how debate 
should take place. I have been very satisfied, and I think everyone 
should be, with the tenor of the debate. The issue has been, and will 
for the next 2 hours, put at issue, and I wish we had more debates such 
as this in the Senate. This is very high class.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Texas.
  Mr. GRAMM. How much time do we have remaining?
  The PRESIDING OFFICER. The Senator from Texas has 6 minutes 20 
seconds.
  Mr. GRAMM. And Senator Dorgan?
  The PRESIDING OFFICER. The Senator from North Dakota has 11\1/2\ 
minutes.
  Mr. GRAMM. I am going to yield 3 minutes 20 seconds to my colleague 
from Arizona, and then I would like Senator Dorgan to use his time and 
then I will conclude.
  Mr. KYL. Mr. President, I agree with the Senator from Nevada, except 
for some recent comments made by the Senator from North Dakota when he 
talked about a comedic approach and a bait-and-switch approach and 
asked the question: Why would we repeal the death tax and then 
reinstate it? The Senator knows full well why that was done. We did not 
do it. Those on his side of the aisle were responsible for that.
  The American people need to understand the reason is that, under the 
rule under which the Tax Reform Act of 1991 was taken up, we could only 
act for a 10-year period after which our actions were sunsetted. We 
didn't want that. We wanted to make the death tax repeal permanent, but 
it was not possible because of opposition from the other side. That is 
the answer to the question posed by the Senator from North Dakota.
  When he asked us, why did you repeal the death tax and then allow it 
to be reinstated, the answer is: We did not; you did. Now you have a 
chance to fix it.
  We all have a chance now to repeal the death tax permanently. This is 
the time for people to stand up. Do we really want it repealed? Do we 
want it repealed permanently? Or were we just kidding when this was 
done last year?
  A lot of Democrats and a lot of Republicans voted, not in a dark room 
but in this Chamber, a year ago to repeal the death tax. They wanted it 
repealed permanently. Only because of a parliamentary rule was that not 
possible. Now it is possible. This is our chance, and the only real 
repeal is the Gramm-Kyl repeal.
  The amendment of the Senator from North Dakota that we will be voting 
on in just a moment is fatally flawed because, while it makes an 
unlimited exemption, you have to walk through a gate--in order to get 
that unlimited exemption--that is closed. Very few, if any, small 
businesses or farms will be able to qualify. How do we know this? 
Because the Senator from North Dakota uses the very same qualifying 
language that is in the existing law.
  From the IRS itself we have the numbers of people who qualify out of 
the over 100,000 estate tax filers. Only a little over 1,000 qualified, 
even in the year with the largest number. In the first year in 1999, it 
was 173 people. In that year, 173 estates would get this wonderful 
relief proposed by the Senator from North Dakota. In 1998, it was 899 
people. In the biggest year, 1,400 people would qualify. Of those, IRS 
is winning two-thirds of the cases with respect to the valuation of the 
assets.
  This is an amendment which has great promise and zero production. As 
the Senator from Missouri said, you can't make a flat tire roll just by 
making it bigger. The Dorgan amendment

[[Page S5409]]

should be defeated because it cannot provide relief to anybody.
  Mr. President, I ask unanimous consent to have printed in the Record 
a paper on interest deductions.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

           Qualified Family-Owned Business Interest Deduction

       Under section 2057, certain ``qualified heirs'' may make an 
     election to deduct the value of certain family-owned business 
     interest from the gross estate. Currently this deduction is 
     $1.3 million. That means if the fair market value of the 
     estate is $10 million, subject to a 50 percent death tax, the 
     QFOBI would reduce the taxable portion of the estate to $8.7 
     million subject to the same 50 percent tax.
       There is a period of up to 12 years in which the IRS can 
     disqualify a QFOBI and impose estate tax plus accrued 
     interest, from the date of death until the recapture event 
     becomes due and owing immediately.
       In general, QFOBI's problems can be simply stated. It is 
     unfair (and impractical) for Congress to draw an artificial 
     line as to who will or will not be subject to the death tax.
       In other words, QFOBI attempts to draw a line so that some 
     small businesses and farms qualify for a complete exemption 
     from the death tax but others will not be able to avail 
     themselves of any death tax relief. In many cases, those 
     businesses that can spend the most money on death tax 
     planning will be more likely to choose this exemption (that 
     is, in truth, simply a giant loophole).


                            summary of qfobi

       1. To qualify (and stay qualified) for this deduction is 
     difficult.
       The decedent was a citizen or resident of the United States 
     at the date of death.
       The business interests are includible in the gross estate.
       The business interests must have passed to or been acquired 
     by a qualified heir from the decedent.
       The adjusted value of the qualified family-owned business 
     interests must exceed 50% of the value of the adjusted gross 
     estate (considered the most complicated requirement of 
     Section 2057 in comments by Professors Roger A. McEowen and 
     Neil E. Hart)
       The business interest must be in a trade or business that 
     has its principal place of business in the United States.
       The business interest was owned by the decedent during 5 of 
     the 8 years before the decedent's death.
       For 5 of the 8 years before the decedent's death, there was 
     material participation by the decedent in the business.
       2. To qualify for the deduction, the ``business interest'' 
     must be either an interest as a proprietor in an entity 
     which:
       At least 50 percent of the entity is owned by the decedent 
     or members of the decedent's family;
       At least 70 percent of the entity is owned by members of 
     two families, and at least 30 percent is owned by the 
     decedent or members of the decedent's family; or
       At least 90 percent of the entity is owned by members of 
     three families, and at least 30 percent is owned by the 
     decedent or members of the decedent's family.
       However, there are additional limitations to the general 
     rules regarding a ``qualified family-owned business 
     interest'':
       (QFOBI) shall not include the following:
       Any interest in a trade or business if its principal place 
     of business is located outside the United States.
       Any interest in an entity if the stock or debt of the 
     entity (or a controlled group of which the entity is a 
     member) was readily tradable on an established securities 
     market or secondary market at any time within 3 years of the 
     date of the decedent's death.
       Any interest in a trade or business (excluding banks and 
     domestic building and loan associations) if more than 35 
     percent of its adjusted ordinary gross income for the taxable 
     year that includes the date of the decedent's death would 
     qualify as personal holding company income if such trade or 
     business was a corporation.
       The portion of an interest in a trade or business that is 
     attributable to:
       Cash and/or marketable securities in excess of the 
     reasonably expected day-to-day working capital needs, and
       Any other assets (other than assets held in the active 
     conduct of a bank or domestic building and loan) that produce 
     or are held for the production of personal holding company 
     income and most types of foreign personal holding company 
     income.
       3. To be a ``qualified heir'':
       A person is a ``qualified heir'' of property if he or she 
     is a member of the decedent's family and acquired or received 
     the interest form the decedent.
       The qualified heir must continue to materially participate 
     in the family business for next 10 years.
       4. To ``materially participate''
       The existence of material participation is a factual 
     determination (in other words open to aggressive challenges 
     by IRS and almost certain litigation), and the types of 
     activities and financial risks that will support a finding of 
     material participation will vary with the mode of ownership. 
     No single factor is determinative of the presence of material 
     participation, but physical work and participation in 
     management decisions are the principal factors to be 
     considered. Passively collecting rents, salaries, draws, 
     dividends, or other income from the trade or business does 
     not constitute material participation. Neither does merely 
     advancing capital and reviewing business plans and financial 
     reports each business year.
       5. Forfeiture of QFOBI status and 10-year Recapture Period:
       Section 2057 imposes an additional estate tax when there is 
     a taxable event. A taxable event occurs if, within 10 years 
     of the decedent's death and before the qualified heir's 
     death, one of the following events occurs:
       The qualified heir disposes of any portion of his or her 
     interest in the qualified family-owned business, other than 
     by a disposition to a member of the qualified heir's family 
     or through a qualified conservation contribution under 
     section 170(h);
       The qualified heir ceases to meet material participation 
     requirements (i.e., if neither the qualified heir nor any 
     member of his or her family has materially participated in 
     the trade or business for at least 10 year period;
       The principal place of business of the qualified family-
     owned business ceases to be located in the United States 
     (This includes bankruptcy or foreclosure!!!);
       The qualified heir loses United States citizenship and 
     neither a qualified trust was created nor was a security 
     arrangement made.
       As under section 2032A, the 10-year recapture period may be 
     extended for a period of up to 2 years if the qualified heir 
     does not begin to use the property for a period of up to 2 
     years after the decedent's death.
       6. Criticisms of QFOBI
       Currently, we have a $1 million exemption that can not be 
     combined with the $1.3 million QFOBI deduction. Confronted 
     with all of QFOBI's complexities and pitfalls, taxpayers 
     simply choose to submit themselves to it in order to obtain 
     an additional $300,000 deduction. Less than three percent of 
     eligible small businesses have used it (don't have cite.) IRS 
     Economist Jacob Mikow documents in a letter that for filing 
     year 2000 a total of 108,322 estate tax returns were filed. A 
     mere, 1,470 of those returns made the QFOBI election.
       Tax lien. For 10 years the IRS has a first position lien on 
     all of the business/farm assets, which means when the family 
     applies for an operating loan so it can ``materially 
     participate'', the bank has to take a second position. A 
     second position is considered an ``at risk'' loan and the 
     family then has to pay 2 to 3 points higher on their 
     operating loan every year for 10 years. This is probably the 
     biggest impediment to facilitating liquidity during the 
     consideration.
       QFOBI does not exempt ``generation skipping tax'' (GST). So 
     a decedent can utilize QFOBI to leave his family business/
     farm to his grandson (subject to all of the QFOBI constraints 
     and limitations) and not pay the death taxes, but the 
     decedent's estate would still have to pay GST tax of 50 
     percent. Effectively this prevents taxpayers from utilizing 
     QFOBI to turn over the family business/farm to any one but 
     their sons and daughters, who may not be the best suited for 
     the job.
       Ownership requirement is the last 5 out of 8 years prior to 
     death. There is not an exception for normal course of 
     business turn over, such as estates with heavy crops or 
     livestock or inventory values. This severely complicates farm 
     planning. For example, the life expectancy of a chicken is 
     probably less then 8 years much less the life expectancy of a 
     potato crop--So there is no ability to lose a chicken and to 
     replace a chicken and to be able to substitute the ownership 
     period.
       Sales in the ordinary course of business create a recapture 
     event as there is not a safe harbor on the sale of a crop-
     inventory or of livestock during the 10 material 
     participation requirement. So if you sold a widget or a 
     chicken or an ear of corn you would owe not only income tax 
     but estate tax.
       50 percent ownership requirement has a lookback period 
     which includes gifts to spouses--so if you balanced an estate 
     to get both unified credits you could lose the QFOBI.
       Recapture provision for over 10 years can 
     disproportionately hurt those businesses and farms that 
     suffer during an economic downturn. For example, in year one, 
     the business might be doing well, but seven years later must 
     file for bankruptcy protection, despite the fact that it 
     plans to reorganize and continue operations in the future. In 
     that event, the QFOBI would terminate and the death tax, plus 
     interest accrued for the past seven years would be due and 
     owing immediately. That fact alone might prevent the company 
     from successfully recovering from bankruptcy.
       Cost, expense and uncertainty of setting up an QFOBI is 
     very high and never ending. The tax code is complicated 
     enough and we should work to reduce its complexity, not 
     pursue winners and loser type death tax reform.
       ABA and many other non partisan institutions have urged 
     repeal of this provision and cautioned against its use, 
     suggesting that it may border on the line of legal 
     malpractice.
       Look at how hard it had been for the opponents of repeal to 
     devise workable QFOBI legislation. No bills have been 
     introduced and we only today saw their proposal to try to 
     convince the American people that we can fix the unfixable.

  The PRESIDING OFFICER. Who yields time?
  The Senator from Texas.
  Mr. GRAMM. Mr. President, let me repeat those facts very briefly 
because facts are persistent things. In 1999,

[[Page S5410]]

104,000 American families filed a death tax return, with 45,000 of them 
ended up paying a death tax. Only 889 qualified for the exemption that 
would be expanded by this amendment.
  In the last 5 years, of the people who would have qualified for this 
and all the other exemptions, only 33 of them have been farmers and 
ranchers.
  So as I said earlier, this amendment provides a political figleaf for 
Senators who are going to vote against a permanent repeal of the death 
tax and who are using this to cover themselves. It is going to provide 
political protection for more Senators than it is going to provide tax 
relief for farmers and ranchers in America. Some 40 Senators will get 
the figleaf of protection. Some 33 farmers and ranchers in 5 years have 
gotten relief from all of these provisions.
  I think this is a clear choice. The Senator complains that the tax 
cut is temporary. Why? Because we did not have 60 votes; because the 
Democrats opposed the President's tax cut in overwhelming numbers. They 
had the ability to filibuster. The only way we could get the tax cut 
adopted was to use a procedure that required that the tax cut expire 
after 10 years. Now the Senator from North Dakota is attacking us for a 
provision that exists because the Democrats would have filibustered the 
tax cut.
  When we voted, I assumed we meant to repeal the death tax. People 
said they did. Now we have come down to doing it. There is only one 
real repeal. That is the amendment I am going to offer with Senator 
Kyl. We are going to raise a budget point of order against this 
amendment. It will require 60 votes to overcome it. The same point of 
order will be raised against our amendment. I urge those who voted for 
the tax cut to vote to sustain this point of order so we can have a 
real repeal, something for which they voted.
  Second, I urge people who did not vote for the tax cut to look at the 
absurdity of having a situation where 11 years from now this death tax 
is going to come out of the grave and prey on family businesses and 
force people to sell off the life work of their family to give the 
Government a 55-percent tax on everything they have accumulated in 
their lives.
  The National Federation of Independent Business is faxing me a letter 
right now opposing this amendment, saying it does not solve the 
problem. I will have that letter printed in the Record. I have the 
letter before me. I ask unanimous consent it be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                               National Federation


                                      of Independent Business,

                                    Washington, DC, June 12, 2002.

         NFIB Releases Statement on Dorgan Death-Tax Amendment

       NFIB Senior Vice President Dan Danner today released the 
     following statement about an amendment offered by U.S. 
     Senator Byron Dorgan (N.D.) that would not provide a full and 
     permanent death-tax repeal:
       ``Senator Dorgan's amendment does not meet the one 
     requirement that NFIB members have demanded on this issue: a 
     full repeal of this onerous tax. The only proposal on the 
     table that will permanently and fully fix this problem is the 
     Gramm-Kyl amendment.
       ``Senator Dorgan's approach operates on a false 
     assumption--that small-business owners can easily plan for 
     the death tax. History has proven that exemptions, half-
     measures and carve outs just do not help real-world small 
     businesses. The existing `small business' exemption that was 
     enacted in 1997 has only helped 3 percent of those it was 
     intended to help. Senator Dorgan's amendment, which is based 
     on this same idea, will only bring us back to the same 
     roadblocks again.''

  The PRESIDING OFFICER. The time of the Senator has expired.
  Mr. KYL. Mr. President, if I can have the attention of the Senator 
from North Dakota, I ask unanimous consent to have printed in the 
Record a compilation of provisions of the so-called QFOBI tax provision 
that illustrate how that is calculated and administered.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

   Section 2057--Qualified Family-Owned Business Interests Deductions

              (Prepared by Sirote & Permutt, May 9, 2002)


                i. estates to which section 2057 applies

       Section 2057 applies to an estate if:
       1. The decedent, at the time of death, was a citizen or 
     resident of the United States;
       2. The executor makes an election and files an agreement 
     consenting to the imposition of recapture tax;
       3. The sum of the QFOBIs passing to qualified heirs, plus 
     the amount of includible gifts of QFOBIs exceed 50 percent of 
     the decedent's adjusted gross estate. In other words, the 
     following numerator divided by the following denominator must 
     exceed \1/2\.
       a. Numerator.
       (i) Aggregate the value of all QFOBIs that are included in 
     the decedent's gross estate and that are acquired by a 
     ``qualified heir'' from, or passed to a ``qualified heir'' 
     from, the decedent.
       (a) A ``qualified heir'' is a ``member of the decedent's 
     family'' and also includes any employee who has been active 
     in the trade or business to which the family owned business 
     interests relates for ten (10) years prior to decedent's 
     death. (Note that this definition does not require that the 
     employee be employed by the family business itself.)
       (b) A ``member of the decedent's family'' includes (a) an 
     ancestor of the decedent, (b) the spouse of the decedent, (c) 
     lineal descendants of the decedent, the decedent's spouse, or 
     the decedent's parents, or (d) the spouse of any descendant 
     described in (c).
       (ii) Add ``adjusted taxable gifts'' and annual exclusion 
     gifts of QFOBIs given to family members, if such interests 
     are continuously held by the family member (other than the 
     decedent's spouse) between the date of the gift and the date 
     of decedent's death.
       (a) ``Adjusted taxable gifts'' are taxable gifts made by 
     the decedent after 1976 that are includible in the decedent's 
     gross estate.
       (iii) Subtract the amount of gifts of QFOBIs included in 
     the decedent's estate.
       (iv) Subtract the cash or marketable securities that exceed 
     the reasonably expected day-to-day working capital needs of 
     the business.
       (v) Subtract any personal holding company-type assets owned 
     by the business.
       (vi) Subtract any of the indebtedness of the decedent on 
     property that is included in the decedent's gross estate, 
     except
       (a) qualified acquisition indebtedness for personal 
     residences;
       (b) debt if the proceeds were used to pay education or 
     medical expenses of the decedent, the decedent's spouse, or 
     the decedent's dependents; and
       (c) debt up to $10,000 used for any purpose.
       b. Denominator.
       (i) Determine the value of the decedent's gross estate 
     without regard to Section 2057.
       (ii) Subtract any indebtedness of decedent on property that 
     is included in the decedent's gross estate.
       (iii) Add the amount of adjusted taxable gifts and annual 
     exclusion gifts of QFOBIs given to family members if such 
     interests are continuously held by the family member from the 
     date of the gift to the date of death.
       (iv) Subtract gifts of QFOBIs included in the decedent's 
     gross estate.
       (v) Add other gifts not included in c above and made by the 
     decedent to the decedent's spouse within 10 years of 
     decedent's death.
       (vi) Add the amount of other gifts not included under c or 
     e above made by the decedent within 3 years of death. In 
     other words, add gifts covered by the annual gift tax 
     exclusion and any other non-taxable gifts made by decedent 
     within 3 years of death.
       (vii) Subtract the amount of gifts otherwise includible in 
     the decedent's gross estate.
       c. The numerator divided by the denominator must exceed \1/
     2\ in order for Section 2057 to apply.
       4. Material Participation Exists
       a. The decedent of a ``member of the decedent's family'' 
     must have owned the qualified business interests and have 
     ``materially participated'' in the operation of the business 
     to which such interests relate for 5 of the 8 years prior to 
     decedent's death.
       b. ``Material participation'' is determined on a factual 
     case-by-case basis that examines the type of activities in 
     which that person was involved, the financial risks 
     associated with these activities, and the mode of ownership 
     of the property itself.
       c. A ``member of the decedent's family'' includes (a) an 
     ancestor of the decedent, (b) the spouse of the decedent, (c) 
     lineal descendants of the decedent, the decedent's spouse, or 
     the decedent's parents, or (d) the spouse of any descendent 
     in (c).
       d. If the decedent becomes disabled or starts receiving 
     social security benefits, the 8 year period is the 8 years 
     immediately preceding the date of disability or the date of 
     the receipt of the first social security check.


   II. ADDITIONAL TAX IMPOSED IF DECEDENTS HEIRS CEASE TO MATERIALLY 
PARTICIPATE IN THE QUALIFIED FAMILY-OWNED BUSINESS OR DISPOSE OF THEIR 
                            INTEREST THEREIN

       1. Section 2057 imposes an additional estate tax if, within 
     10 years after the date of the decedent's death, any one of 
     certain recapture events occurs, as follows: (1) an heir 
     receiving a QFOBI does not continue to materially participate 
     in the business for 5 or more years of any 8 year period in 
     the 10 years following the decedent's death; (2) the 
     qualified heir disposes of his or her interest to anyone 
     other than other than members of his or her family or through 
     a qualified conservation contribution; (3) the qualified heir 
     loses United States citizenship and does not hold his or her 
     interest through a domestic trust having at least one United 
     States trustee, or (4) the principal place of business ceases 
     to be located in the United States. With respect to a 
     qualified heir, ``material participation'' will be met if the 
     qualified

[[Page S5411]]

     heir is a surviving spouse, minor child, student or disabled 
     heir who actively manages the business. Furthermore, a 
     qualified heir will not be treated as disposing of an 
     interest by reason of ceasing to be engaged in a trade or 
     business so long as the QFOBI interest is used in a trade or 
     business by any member of the qualified heir's family.
       2. This additional estate tax is equal to the applicable 
     percentage of the adjusted tax difference attribute to the 
     QFOBI, plus interest at the underpayment rate for the period 
     beginning when the estate tax liability was originally due 
     and ending on the date the additional estate tax is due. The 
     adjusted tax difference attributable to the QFOBI is 
     calculated as the difference between the estate tax which 
     would have been due but for the election to deduct the family 
     owned business interest under 2057 and the actual estate tax 
     paid. The applicable percentage is determined with reference 
     to the year in which the recapture event occurred, as 
     follows:

                                                  Applicable Percentage
Number of years after date of death:
1 through 6.........................................................100
7................................................................... 80
8................................................................... 60
9................................................................... 40
10.................................................................. 20

       a. The additional estate tax is a personal liability of 
     each qualified heir to the extent of the portion of 
     additional tax that is imposed with respect to his or her 
     interest in the QFOBI.
       b. For example, Brother and Sister each inherited 50 
     percent of the qualified family-owned business from their 
     mother. Their mother's estate saved $400,000 in estate tax 
     using 2057. Brother did not materially participate in the 
     business, but Sister did, thereby meeting the material 
     participation test to qualify under 2057. During year 8, 
     Sister sold her interest in the business to someone other 
     than a member of her family, causing a recapture event to 
     occur. Of the $400,000 tax savings, 60 percent or $240,000 
     must be recaptured with interest. Brother and Sister each 
     owes half of the additional estate tax due.

  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, we are now told that this circumstance of 
having an estate tax repeal, engineered by my colleague from Texas and 
others last year, that steps up a repeal over 10 years, repeals the 
estate tax, then brings it back into force in 2011, is something that 
the Democrats made them do.
  It reminds me of Flip Wilson; remember that? ``The Devil made me do 
it.''
  The reason we have this comical circumstance of a bill last year, 
proposed by my colleagues over there, that intends to repeal on a 
graduated basis the estate tax to a final repeal in 2010, and then 
bring it back into force in 2011, is not because someone on this side 
of the aisle made them do it. It is because their numbers didn't add up 
and they knew they didn't add up. That is why it exists.
  After that bill was passed, people were asking the question: What 
kind of a Congress passes a piece of legislation that says, oh, by the 
way, there is only 1 year in which you can die in the next decade or so 
and be exempt from the estate tax; that is, 2010? If it is 2009, you 
are taxable. If it is 2011, you are taxable. Now we hear this old, 
``The devil made us do it.'' That doesn't quite fit.
  C. Northcote Parkinson wrote Parkinson's law that I studied when I 
was in graduate school. It is a fascinating set of laws.
  He said at one point that in every organization there is at least one 
person who is invariably 100 percent wrong. He said someone like that 
can be valuable because then you will always know who will give you the 
wrong advice.
  I am not going to suggest anything about my colleagues with that 
except to say this: There are occasions on the floor of the Senate when 
the advice we receive is just flat wrong.
  This question of trying to help businesses and farms that are owned 
by families to be passed on to the descendants--to the kids--to be able 
to continue operating them is an interesting one.
  The only way we are going to immediately repeal the estate tax on 
passage of a family farm or business to the kids upon the parents' 
death is if we pass the amendment I offered today. That is the only 
circumstance in which that is going to happen, on January 1, 2003.
  My colleague from Texas will offer his proposal which will make it 
happen over the next 7 years, but not now.
  It is interesting. My colleague from Illinois talked about who the 
beneficiaries are. After all, we say no husband and wife with assets of 
less than $8 million will ever pay an estate tax. That is in my 
amendment. And no family business passed on to kids will pay an estate 
tax at all if the kids continue to run it. That is in my amendment. The 
question is, Who will benefit by defeating my amendment and embracing 
the proposal by my colleagues from Texas and Arizona? Who will benefit?
  My colleague from Texas has no doubt heard me from time to time refer 
to Bob Wills and the Texas Playboys, the famous Texas band in the 
1930s. In the lyrics in their song, the little guy picks the cotton and 
the big guy gets the honey; the little honeybee sucks the blossom and 
the big bee gets the honey.
  This is about honey and money. And it is about the way it always 
works somehow on the floor of the Senate.
  Guess who benefits. It is not in most cases folks at the bottom of 
the economic ladder, or even in the middle of the economic ladder, who 
are the beneficiaries. It somehow always seems to me that the proposals 
here--especially this type of proposal--offer the circumstance where we 
say, Let us provide a tax cut for the wealthiest Americans.
  What are our priorities? Are our priorities education, strengthening 
America's schools, investing in Social Security? Are our priorities 
strengthening Medicare? Are they providing a tax cut for middle-income 
taxpayers. Are our priorities providing a tax cut and deduction for 
being able to send your kid to college or providing health care 
benefits for you and your workers and your business? Are those our 
priorities? No.
  My colleagues say that is not a priority of ours. Those priorities 
must take a backseat to the priority of providing estate tax relief for 
the very wealthiest in America.
  This isn't about being opposed to those who are wealthy. In my 
proposal in this amendment, there is a very substantial estate tax 
exemption of $8 million. If you are trying to pass a family business or 
farm on to the kids who are going to run it, you are not going to pay 
an estate tax. That repeal is effective next January 1.
  My colleagues say: No. We support this issue of helping farms and 
businesses, but we support helping them 7 years from now. We have used 
that as the pole-vaulting contest to get to the point where we can 
repeal the estate tax, but it is not so important to us that we believe 
on January 1 of next year businesses and farms passed on to the kids 
ought to have the estate tax repealed.
  It is not that important to them. It is important to me. And I 
believe very much that we ought to pass this amendment. We voted on 
this amendment last year. Times have changed, as you know. Things are 
quite different. My amendment last year got 43 votes.
  Last year, just prior to this time, we were on the floor of the 
Senate, and we had estimated budget surpluses as far as the eye could 
see. We had people on the floor of the Senate saying: We will have 
budget surpluses year after year. Let us provide very large tax cuts.
  Some of us said: Maybe we ought not do that. Maybe we ought to be a 
bit conservative. What if something happens?
  Guess what happened. In a matter of 7 or 8 months we ran into a 
recession, and then we had a war. The result is that our economy 
faltered. These big surpluses turned into big deficits.
  But it didn't mean a thing to those who are marching towards estate 
tax repeal. They are back here on the floor of the Senate as if nothing 
happened. It is just as if they have missed the last year and our 
priority remains to try to lift the burden of taxes from those who are 
at the top end of the income ladder in this country. If you have $1 
billion, our priority remains that we believe in tax cuts for you, and 
we are here to fight for you.
  Is there anybody here who is willing to fight for the people at the 
bottom of the economic ladder? Is anybody proposing a tax cut this 
afternoon for middle-income taxpayers trying to send there kids to 
school? I don't think so. That is not the priority.
  That is why I hope we will pass our amendment. This amendment says, 
yes, let us provide dramatic increases in the exemption for the estate 
tax, and let us exempt the tax in the transfer of the family farms and 
businesses to the kids who want to run them; but let us not give up the 
opportunity for a couple hundred billion dollars in the

[[Page S5412]]

second 10 years that might be used to help America's kids and schools, 
help strengthen Social Security, help strengthen Medicare, and do the 
things that will also make this a better country.
  I hope my colleagues will understand that the only way to address 
this issue of family farms and businesses that we have heard so much 
about is this amendment.
  One final point: My colleagues have talked about the family-owned 
business deduction not working. It is interesting to me. In fact, they 
repealed it in law last year. They said, let us repeal the family-owned 
business deduction. That was their bill last year. They did it in 2004, 
which is a complete contradiction. If it didn't work, why wouldn't you 
repeal it immediately? If it does work, why do you repeal it in 2004? 
It does work, and they know it. They simply allege that it doesn't work 
so they can try to defeat this amendment and provide relief for the 
people with the highest incomes at a time when this country is in debt 
and is going deeper in debt. Their proposal doesn't have as a priority 
to help on the other things that are important--health care, Social 
Security, education, and much more. We will get to those things by 
casting some sensible votes this afternoon on this amendment.
  Support this amendment, oppose the Gramm amendment, and do the right 
thing.
  I yield the remainder of the time.
  The PRESIDING OFFICER. All time has expired.
  Mr. GRAMM. Mr. President, as provided for in the unanimous consent 
agreement, I make a point of order under section 311 of the Budget Act 
against the pending Dorgan amendment.
  Mr. DORGAN. Mr. President, pursuant to section 904 of the 
Congressional Budget Act of 1974, I move to waive the applicable 
sections of that act for the purposes of the pending amendment, and I 
ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The question is on agreeing to the motion. The clerk will call the 
roll.
  The senior assistant bill clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms) and the Senator from Idaho (Mr. Crapo) are necessarily absent.
  I further announce that if present and voting the Senator from North 
Carolina (Mr. Helms) would vote ``no.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The yeas and nays resulted--yeas 44, nays 54, as follows:

                      [Rollcall Vote No. 149 Leg.]

                                YEAS--44

     Akaka
     Bayh
     Biden
     Boxer
     Breaux
     Byrd
     Cantwell
     Carnahan
     Collins
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Edwards
     Feinstein
     Graham
     Harkin
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Leahy
     Levin
     Lieberman
     McCain
     Mikulski
     Nelson (FL)
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Snowe
     Specter
     Stabenow
     Torricelli
     Wellstone

                                NAYS--54

     Allard
     Allen
     Baucus
     Bennett
     Bingaman
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Carper
     Chafee
     Cleland
     Clinton
     Cochran
     Craig
     DeWine
     Domenici
     Ensign
     Enzi
     Feingold
     Fitzgerald
     Frist
     Gramm
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchinson
     Hutchison
     Inhofe
     Kyl
     Lincoln
     Lott
     Lugar
     McConnell
     Miller
     Murkowski
     Murray
     Nelson (NE)
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Stevens
     Thomas
     Thompson
     Thurmond
     Voinovich
     Warner
     Wyden

                             NOT VOTING--2

     Crapo
     Helms
       
  The PRESIDING OFFICER. On this vote, the yeas are 44, the nays are 
54. Three-fifths of the Senators duly chosen and sworn not having voted 
in the affirmative, the motion is rejected. The point of order is 
sustained and the amendment falls.
  The majority leader is recognized.
  Mr. DASCHLE. Mr. President, I appreciate the work that is being done. 
In the interest of all colleagues, let me simply make sure that people 
understand that we have a debate on another amendment. Under the 
unanimous consent agreement, the debate can last up to 2 hours. It 
would be my expectation, after completion of the debate on the next 
amendment, the Gramm amendment, we will then vote on the Conrad 
amendment and the Gramm amendment back to back. It is then my hope that 
we can have a vote on a point of order that will take place either 
immediately or shortly thereafter.
  In the meantime, we are still discussing the matter of stem cell 
research and cloning and a unanimous consent request there, as well as 
a hope that I have that we can move to terrorism insurance legislation. 
I just indicated to Senator Lott that it would be my desire to move to 
the terrorism insurance legislation immediately following either the 
debate on stem cell or the debate on the estate tax legislation.
  So it is my intention to ask unanimous consent to move forward on 
both of those issues. It is my understanding that some of my colleagues 
wish to have a little additional time. So before I propound a request 
on either one of those issues, we will certainly be happy to 
accommodate the request of our colleagues. But I want people to be on 
notice that it is our intention to file a unanimous consent request on 
terrorism insurance, as well as on the stem cell cloning debate. That 
is with an understanding that Senator Lott just noted. I had been told 
there was some interest in filing cloture on the motion to proceed on 
defense. Senator Lott has indicated to me that is not the case. So I 
will not propound these requests with that understanding.
  I yield the floor.
  The PRESIDING OFFICER. The Republican leader is recognized.
  Mr. LOTT. Mr. President, I have been working with the interested 
Senators on this issue of cloning, trying to see if we can get a 
unanimous consent agreement. We are continuing to do that.
  With regard to the terrorism insurance bill, if we don't get an 
agreement on cloning, it is my hope that we can get an agreement to 
proceed with the terrorism issue. There are a couple of points that 
need to be clarified, and we are discussing those now. We will, 
hopefully, get an agreement on one, or perhaps both, of those issues. 
We will continue to work on that.
  Mr. DASCHLE. Mr. President, I may have misspoke. I indicated there 
are going to be two votes at the end of two hours. That will complete 
the debate on the estate tax issue: the completion of the debate on the 
amendment now to be offered by Senator Gramm, and then the vote on the 
amendment offered by Senator Conrad. We will determine what the course 
of business will be subject to the discussions underway on both 
terrorism insurance and the stem cell cloning debate as well.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Texas is recognized.


                           Amendment No. 3833

  Mr. GRAMM. Mr. President, I send an amendment to the desk on behalf 
of myself, Senator Kyl, Senator Brownback, Senator Nickles, and Senator 
Hutchison.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

  The Senator from Texas [Mr. Gramm], for himself, Mr. Kyl, Mr. 
Brownback, Mr. Nickles, and Mrs. Hutchison, proposes an amendment 
numbered 3833.

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

             (Purpose: To permanently repeal the death tax)

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Permanent Death Tax Repeal 
     Act of 2002''.

     SEC. 2. ESTATE TAX REPEAL MADE PERMANENT.

       (a) In General.--Section 901 of the Economic Growth and Tax 
     Relief Reconciliation Act of 2001 is amended--
       (1) in subsection (a) by striking ``shall not apply--'' and 
     all that follows and inserting ``(other than title V) shall 
     not apply to taxable, plan, or limitation years beginning 
     after December 31, 2010.'', and

[[Page S5413]]

       (2) in subsection (b) by striking ``, estates, gifts, and 
     transfers''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect as if included in section 901 of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001.

  Mr. GRAMM. Mr. President, I have sent to the desk the real repeal of 
the death tax. This amendment is identical to the language that was 
adopted in the House of Representatives last week.
  Current law phases in the elimination of the death tax and then, due 
to the limitations of the Budget Act, the death tax rises up out of the 
grave in 2011 and starts destroying family businesses, family farms, 
and family dreams in 2011. What our amendment does is makes the repeal 
of the death tax permanent.
  I want to touch on a couple of issues, and then I want to yield to 
some of my colleagues who want to speak.
  I remind my colleagues that when we passed the tax bill, we had 58 
votes. It would have taken 60 votes to have made the tax cut permanent 
by waiving the provisions of the Budget Act. We only had 58 votes. We 
have this anomaly that the death tax rises out of the grave because we 
only had 58 people who supported the tax cut.
  I believe everybody who voted for that tax cut was committed to the 
principle that we were repealing the death tax. Today we have an 
opportunity--the first real opportunity--to achieve that goal.
  I remind my colleagues that in the year that the repeal would go into 
effect, which would be 2011, we are projected by the latest 
Congressional Budget Office estimate to have a $450 billion surplus. 
Our Democrat colleagues say they would like to make it permanent, but 
we cannot afford it. I remind my colleagues, when it would go into 
effect, under current estimates, we would have a $450 billion surplus. 
What they are really saying is they want to spend the money rather than 
letting people keep their farm, keep their business, keep their dream.
  We have heard throughout this debate Member after Member get up and 
say that this repeal will take money away from the Treasury and that 
they are very worried about the debt and the deficit. Not once, twice, 
three, four, or five times, but six times in the last 9 months we have 
increased spending many times more than would be required to pay for 
the repeal of the death tax.
  In nonrequested, nonemergency funding in the emergency appropriations 
bill, items the President did not ask for, we spent four times as much 
as it would take to fund the repeal of the death tax next year.
  In total, in the last 9 months, the same people who are saying we 
cannot afford to make this repeal permanent have voted for 15 times 
more spending next year than the cost of repealing the death tax. These 
are the same colleagues who have 100 different taxes that ought to be 
increased, 41 different tax cuts that ought to be taken back, but they 
do not have one single idea about how we could control spending.
  In reality, this is a very simple debate. When you cut through to the 
bottom line, it is a debate about priorities. Those who are opposed to 
making the tax cut permanent are basically saying: We are willing to 
force people to sell their business and sell their farm, tax a family 
at the moment of death and take away the life work of their parents so 
that Government can spend more money. That is what this is about.
  Are you willing to take away somebody's farm, somebody's business, 
somebody's dream so Government can go on spending as usual? I am not. 
This is a clear-cut issue, and it is a question of right and wrong. It 
is not right for people to work a lifetime, pay taxes on every dollar 
they earn, scrimp, save, sacrifice, plow that money into a business, 
plow it into a farm, work 12 or 14 hours a day, and then when they die 
their children have to sell their life's work to pay a tax on income 
that has already been taxed. It is fundamentally wrong. This is a moral 
issue, not just a tax issue or an economic issue.
  I urge my colleagues to vote to make the death tax repeal permanent. 
If the people who voted for the tax cut and if the people who voted for 
the sense-of-the-Senate resolution earlier this year are saying we 
ought to make the death tax repeal permanent voted for this amendment, 
we would succeed.
  I urge my colleagues to take away this tax on farms, ranches, 
businesses, and dreams by making the repeal of the death tax permanent.
  I yield 5 minutes to the Senator from Texas, Mrs. Hutchison.
  The PRESIDING OFFICER (Mr. Carper). The Senator from Texas is 
recognized.
  Mrs. HUTCHISON. I thank the Chair.
  Mr. President, I thank the senior Senator from Texas for sponsoring 
this amendment. The Senate has passed the death tax repeal. We are 
trying to make it permanent. In fact, it was a year ago this month that 
we passed the bill that would provide urgently needed tax relief for 
Americans, but now we want to finish this job and make it permanent so 
people can plan for their futures.
  Why is it important to permanently repeal this tax? Because it 
punishes people for saving. Everyone pays taxes on the money they earn, 
but then we all have a choice: We can spend the money or we can save 
it. Some may choose to take a vacation or buy a new car. There is 
nothing wrong with that. That is their choice. It is their money. But 
others will invest it for retirement, plow it into their family farm or 
ranch, or invest it in the family business, creating new jobs and 
keeping our economy going.
  All of these people want to pass their savings to their children. In 
the end, they have put off enjoying the money they worked hard to earn 
in order to build a more secure future for their children.
  There is an old saying that the key to wealth is not how much you 
earn but how much you do not spend. These people chose savings over 
consumption. This is something we should encourage and support, but 
with the death tax, when they die, the Government takes up to 55 
percent of what they saved. This is wrong, and Americans know it.
  Three out of four voters would like to see the estate tax eliminated. 
This overwhelming support exists because the American people understand 
this tax is unfair, inefficient, and bad policy. More important, the 
people of our country seek the American dream of improving their lives 
and the lives of their children, and they know this tax works against 
that.
  People who want to keep the death tax argue that it only affects a 
small percentage of the population, but they miss the point. It is not 
a matter of how many are affected but whether it is right or wrong, and 
the death tax is clearly wrong.
  I told a story a few years ago about the family of David Langford of 
San Antonio. It is not a story; it is true. Mr. Langford's mother 
passed away in 1993 and, as a result, he faced a tax liability of more 
than $400,000 because two of the ranches that had been in their family 
for over five generations had, of course, increased in value.
  They had been in the family for over 100 years.
  One happens to be in the hill country of Texas, which Texans know is 
one of the most beautiful parts of our State and the prices have gone 
out of sight.
  In order to pay the taxes and keep the ranches for his family, Mr. 
Langford had to sell his mother's house, his own house, and many 
personal assets, as well as move into a small condominium and borrow 
$190,000. But that was not the end. The Langfords spent 5 years trying 
to reach an agreement with the IRS that would bring down the fair 
market value of the properties. They settled with the IRS for $415,000. 
The Langfords had spent $70,000 in attorney's fees associated with 
dealing with the IRS.
  So in 2001, to cover the costs, Mr. Langford had to sell the condo 
and one of the farms in McMullen County, a ranch that had been in his 
family for five generations.
  Now the Langfords wonder if they will be able to pass the Kendall 
County property, the other farm which has been in the family for seven 
generations, to his children. He jokes that if he dies in 2010 his 
family can keep the ranch, but they will not be able to keep it if he 
lives past 2010.
  This is not a joke. This is a situation families across America will 
face. We must eliminate the death tax so that regular people, such as 
David Langford, can pass on their treasures from their families to 
their children. I think his family has more than paid their fair

[[Page S5414]]

share to the U.S. Government, having to sell a farm that had been in 
the family for over 100 years.
  Then there is Debbie Gillan, who struggled to keep her family's ranch 
after her uncle and father passed away, and now she wants to try to 
keep it for her two sons.
  Afton Pumps employs 60 people in Houston, TX. It is a small family-
owned business, but it does not generate enough cash to cover the 
potential death tax liability to make it to the next generation. In 
fact, it is said that less than 50 percent of family businesses can 
survive the second generation, and less than 20 percent the third 
generation.
  I ask the Senator from Texas if I could have an additional 2 minutes?
  Mr. GRAMM. I yield the Senator an additional 2 minutes.
  The PRESIDING OFFICER. The Senator has an additional 2 minutes.
  Mrs. HUTCHISON. If we are going to eliminate these family-owned 
businesses, it does not affect only the family, it also affects the 
people who work at places such as Afton Pumps because if they have to 
sell to pay for death taxes or they have to sell the property, there is 
a good chance those jobs are going to be eliminated, assuming they can 
sell it at all.
  In fact, one of the really sad things is the death tax is really a 
tax on asset-heavy, low-producing properties because many times these 
heavy assets have to be sold. They have to be sold at fire sale prices 
so the true value is not gained from the property, and then one has to 
come up with the money to pay the inheritance tax. It really is not a 
fair tax. It affects a lot of regular people, people in a situation 
where something was purchased at very low cost, but they have built it 
or their families have built it. They have a right to keep it. It was 
earned with the hard labor of their family, and they should be able to 
pass it to their children.
  I think this tax really came into being as extra income in time of 
war, but it was never repealed because the Government got hungry for 
more and more social programs. This is not a fair tax and we need to 
eliminate it so the people of our country can plan for their children's 
futures, so they will not have to do crazy things to try to protect 
property or businesses or assets that have been in their families for 
generations. This is not the American way.
  I yield the floor.
  Mr. REED. Mr. President, I yield myself 10 minutes of the opposition 
time.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator is recognized for 10 minutes.
  Mr. REED. Mr. President, this is a very auspicious moment in our 
history, not just this debate in the Senate but the fact that we are in 
the midst of a war with extraordinary demands, fiscal demands as well 
as demands of patriotism, on the country.
  Yesterday we raised the debt limit. We are in a situation where there 
are efforts to fund worthy programs that are supported on both sides. 
First, of course, is national security, homeland defense, but also an 
educational proposal that the President championed. Yet at this time, 
we are considering the total repeal of the estate tax.
  A great deal of the discussion is rhetorical. I think it is useful to 
point out some of the facts with respect to the estate tax. First, no 
estate less than $1 million is taxed at all today, which excludes the 
vast majority of Americans. In fact, if most Americans are asked what 
they are worried about at the end of their days, it is not the estate 
tax. It is paying for long-term care. It is affording a nursing home 
without having to sell their home or dig deeply into their savings. 
That is what most Americans worry about. They are not worried about the 
estate tax. Ninety-eight percent of estates pay no estate taxes at all.
  In 1999, fewer than 49,000 out of 2.3 million estates--that is only 
2.1 percent--paid any estate taxes whatsoever. This percentage is 
projected to drop as the exemption rises from $650,000 in 1999 to $3.5 
million in the year 2009. Now, the estate tax repeal will benefit some 
Americans, very few Americans, and the wealthiest Americans. Estates 
larger than $5 million paid half of all estate taxes, and if we look at 
the 467 largest estates, worth at least $20 million, they paid nearly 
one-quarter of the estate taxes paid. So this is a benefit that will 
not be fairly shared by all Americans. It will be significantly shared 
by very wealthy Americans.
  Now it should be pointed out, too, that no estate tax is paid if a 
spouse survives. That spouse does not have to pay estate taxes. 
Currently, as I indicated, an individual can pass along up to $1 
million without estate taxes, and that increases to $3.5 million in the 
year 2009, and a couple can pass along twice that amount because of the 
spousal rules.
  Furthermore, only a small fraction of taxable estates consisting 
primarily of family-owned small businesses or farm assets pay estate 
taxes. This is a topic that receives a lot of rhetorical attention, but 
the reality is this: In 1999, only 1.4 percent of taxable estates were 
farm estates, and only 1.1 percent were small businesses. There are 
already special provisions that are provided for these farms and for 
these small businesses, such as allowing additional sums to be 
bequeathed tax free and also deferring payments on taxes for up to 14 
years.
  Farm estates in 1999 pay only 0.7 percent of all Federal estate taxes 
collected, and so this is not a crisis of sweeping proportions that is 
engulfing every farm in America--only very few farms, very wealthy 
estates. Even among these family-owned farms and small businesses that 
might actually pay estate taxes, there is scant evidence the tax has a 
real impact on their operations; that, in fact, they have to sell the 
farm to pay the taxes or sell the small business to pay the taxes.
  One thing that is important to note, a great deal of an estate is 
made up of unrealized capital gains. The deceased bought property 50 
years ago very inexpensively. Today that property is worth a great 
deal. Under the current system, the heirs get that property with a 
stepped-up basis and so if they choose to sell the property after they 
have paid the estate tax or after they have been exempt from the estate 
tax, they really pay no capital gains whatsoever because significant 
portions of the property are unrealized capital gains on which no 
capital gains tax has ever been assessed against the property.
  There is another argument that is made by proponents, and that 
argument is the fact that repealing of capital gains will stimulate 
economic growth in America, will increase savings, will increase our 
overall growth. A new report from the Joint Economic Committee and the 
Democratic staff points out that these claims are exaggerated at best.
  Repeal would affect very few families and have very little impact on 
total capital accumulation in the United States. The tax is very small 
itself, relative to family net worth. The gross value of taxable 
estates comprised only 0.3 percent of the total net worth of the 
household sector, and the estate tax itself claimed less than 0.06 
percent. That is what the estate tax claims in terms of the household 
sector of America. Repeal would have a small, uncertain effect on 
individuals' private saving. There is no real indication that saving 
will increase. In fact, it is likely or possible that consumption could 
increase as people took estimated estate tax payments and decided they 
were not due any longer under the proposed regime, they would be spent.
  It is unclear whether this proposal will increase national saving. 
Without increased national saving, we will not have the kind of 
economic growth we want.
  This repeal, if enacted, will dramatically and definitely affect the 
revenues going not just to the Federal Government but to State 
governments. The Joint Committee on Taxation estimates permanent repeal 
would cost, in 2012 alone, $56 billion. Others suggest that estimate is 
rather conservative. There would also be comparable losses at the State 
level. At a time when we are seeing a deficit situation in the United 
States, that deficit will be compounded by the loss of the estate tax. 
It will result in a decrease in public and national saving. As a 
result, we will not be stimulating the kind of growth we want, for many 
reasons, including the fact that the purported savings from compliance 
costs might not be realized either, since most estates, most investors, 
most people with property will continue, regardless of the estate tax, 
to plan for the disposition of their assets and engage legal

[[Page S5415]]

counsel. The notion that we will save and streamline the cost of 
providing for the future is not substantiated by the reality of what 
people do every day.
  Now, can we afford to repeal the estate tax? I don't think we can, 
particularly in a situation where we are seeing the cost likely in the 
second decade to balloon to $750 billion.
  We are considering in the next few weeks legislation both sides 
support. First, a pharmaceutical benefit for seniors. Will that cost 
billions of dollars? Yes, it will. Where will that money come from? 
Right now, it is coming from the Social Security fund and Federal debt 
if we propose it and pass it. This will make our proposals much more 
difficult to enact and fund. It is easier to enact than to fund a 
pharmaceutical benefit. The Department of Defense is proposing a 
missile defense system supported by both sides. They are reluctant to 
tell us what the life cycle cost will be over 20 years. Why? Because 
those costs are likely to be in the hundreds of billions of dollars. 
Where do we get that money? We are in a deficit now. We will be in a 
worse situation if we pass the permanent repeal of the estate tax.
  We have to recognize that each day we wake up, we encounter a new 
threat to our national security. Two days ago, the FBI announced they 
seized a terrorist who was plotting to detonate a radioactive device in 
the United States, causing us to ask fundamental questions: Are all of 
our university laboratories with isotopes fully protected? Are all of 
our reactors, academic and utility reactors, fully protected against 
theft? That is not an inconsequential cost, but it is a cost we cannot 
avoid. If we pass this, we will be in a more difficult position to meet 
those responsibilities.
  I urge we reject this approach and adopt the approach suggested by 
Senator Conrad that raises the exemption level, making it quite clear 
and obvious we are not going to penalize those smaller estates, we are 
not going to penalize the proverbial and somewhat, in many cases, 
elusive family farms that are threatened by this estate tax. I hope we 
can do that. I hope we reject this proposal and adopt the Conrad 
proposal.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. DODD. 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. DODD. 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. DODD. Mr. President, I rise in opposition to the Gramm amendment, 
total repeal of the estate tax.
  Just yesterday, the Senate responded to the President's request to 
increase the debt ceiling by $450 billion dollars. We are no longer 
retiring debt and reducing our indebtedness, we are increasing it. The 
surplus is gone. The President's own budget advisors project deficits 
for the foreseeable future. And yet, the President is calling on the 
Congress to permanently repeal a particular tax.
  The cost of repealing the estate tax is not inconsiderable. The cost 
is $99 billion over the next 10 years. In the decade after, the repeal 
would cost $740 billion. How are we going to pay for this? How is this 
massive new cost going to be paid for? Are we going to run deeper 
deficits? Are we going to take it out of the Social Security trust 
fund? And if so is it wise to drain this fund at the precise time that 
the baby boom generation is expected to reach retirement age?
  There is a war in case anyone has not noticed. It is going to cost 
money to wage it. And yet we are told that we must repeal the estate 
tax for the good of the country.
  Every day we are getting reports that there will be cut backs on 
essential services. In places like DC, South Dakota, and many other 
States children's school days have been shortened. Summer school 
classes are being cancelled and after school programs are being 
cancelled. And yet there are those that think that the most important 
thing we can do as a country, an absolute priority that should prevail 
over all other priorities, is permanently repealing a tax that is payed 
by billionaires and multimillionaires.
  At a time when we are tying to combat terrorism and we are struggling 
to educate our children and provide senior citizens with security in 
their retirement, when we are trying to maintain budget discipline that 
is so vitally important to our countries long term economic growth. 
People want to give, they do not want to take from their country at a 
time like this.
  Rarely do Members of the Senate find themselves so short of anything 
to say. I find myself dumbfound by this suggestion that we totally 
repeal the estate tax. At other times I might have understood the 
motivation. Just a year ago, we were talking about close to $6 trillion 
in surplus over the next 10 years, and if this proposal were brought 
before the Senate I might have disagreed or objected to it, but perhaps 
a case could be made with $6 trillion of surplus, the days of a 
national debt behind us, annual deficits no longer a debate, no longer 
an issue. With $6 trillion of accumulated surplus, there might be room 
within that surplus for $740 billion of tax expenditures.
  In light of everything that has occurred in the last year, I am truly 
dumbfounded that we would suggest today that this would even be a close 
vote. That we would be talking about removing from the wealth of our 
Nation over the next 20 years close to $800 billion to satisfy a tiny 
fraction--I mean a tiny fraction--of the American public in light of 
everything else that has occurred, is truly dumbfounding.
  My State, the State that Senator Lieberman and I represent, is often 
referred to as one of the most affluent States in America on a per 
capita income basis. One might think in this particular case that I was 
probably the recipient of a large volume of mail or e-mails, 
conversations, asking me to vote for the total repeal of an estate tax.
  In light of the fact that the people who will benefit the most, the 
largest number of people as a percentage of the people, would come from 
the State I represent--I represent 3.5 million people in the State of 
Connecticut. Out of 3.5 million people whom I represent in the State of 
Connecticut, 980 people would actually have gross estates that would 
subject them to the estate tax as it is presently written. My 
colleagues are certainly aware, I hope the American public is, that we 
have essentially reformed the estate tax in this country to the point 
that it only now touches a very tiny percentage of the American public.
  So here in one of the most affluent States in the United States on a 
per capita basis--the State I represent--with a population of 3.5 
million people--there are only 980 estates that have gross incomes that 
would subject them to this tax.
  When you factor in the exemptions--for spouses, who do not pay estate 
tax, for family-owned farms and businesses--the number in Connecticut 
comes down to 73--73. You start out with 980, but if you take in the 
exemptions that we have written in we are talking about 73 estates, in 
the wealthiest State in the Union. And the pricetag, over 20 years, is 
almost $800 billion.
  Maybe people find the word ``dumbfounding'' to be a little harsh, but 
I do not know what other word you could use than that one, when you 
consider how much wealth they are going to remove when we need so much. 
Here we are, a year after the accumulation of great surpluses, already 
talking about a deficit this year in the neighborhood of $100 to $120 
billion, maybe more before we are done.
  Right now no one argues with those numbers. That is this year. The 
President has already announced there will be deficits in every year of 
his Presidency over the next 3. In fact, many suggest that deficits 
will now continue for at least 10 years.
  So here we are back where we were at the beginning of the 1990s, 
building up that national debt with annual deficits. In the midst of 
all of that, 9-11, where we must now respond, as has been said so often 
by every Member of this Chamber, by the President and others, the world 
has changed for us fundamentally. It will never be the same again 
because of what happened on that date.

[[Page S5416]]

  We are taking steps now, investing resources to make our country 
stronger, to see to it that we have better protections here at home and 
abroad. It is an expensive undertaking to do so. In the midst of this 
expensive undertaking--while simultaneously we also want to invest in 
the educational needs of our Nation, provide for prescription drug 
benefits, do what we can to make sure Social Security and Medicare will 
be there when people need them, invest in the transportation 
infrastructure which is critically important, a farm bill which we were 
told was absolutely essential, you go down the list of the things we 
know we need to invest in to make this country strong and viable--along 
comes a proposal that will take 3,500 estates in this country and allow 
them to get a tax break at the expense of everyone else in America. And 
the cost is roughly $99 billion in the first 10 years or so, and after 
that, according to the estimates I have seen, $740 billion. Add the two 
and the price tag is in the $800 billion range. I find it interesting 
that moments ago we had an opportunity to pass an amendment that would 
have provided relief to small family farms and businesses for a price 
tag that is substantially less than a full repeal, and yet many of the 
Senators who argue that they would like to provide estate tax relief to 
families and businesses voted no on the amendment.
  I do not know how we can go home to our constituencies at a time like 
this, when we are worried about whether or not we are going to have an 
intelligence agency, a domestic policing operation, and a 
reorganization of Government. We are debating in these very hours how 
we are going to do that, knowing full well it will cost us dearly to do 
that right--seeing that we have defense structures, seeing that first 
responders have what they need, God forbid we have another tragedy like 
we did on September 11. And in the face of all that, I have to explain 
why it is we are going to provide a total repeal of a proposal--offered 
by Teddy Roosevelt, by the way. This was not an idea that came out of 
Franklin Roosevelt, it came out of his cousin, Theodore Roosevelt, the 
great Republican Progressive President, who argued an estate tax was 
not only a viable and intelligent revenue source but also had some 
social benefits.
  I don't think it ought to go without mention that some of the 
wealthiest people in this country are arguing strongly against the 
Gramm amendment, strongly against the total repeal. People such as 
Warren Buffett, one of the brightest financial minds in this country, 
argued strongly against this. John Kluge, who built one of the great 
fortunes in this country, who was a wonderful genius, argued against 
this particular proposal. You go down the list. The Gates family argued 
against this proposal.
  I have received five letters--five, out of 3.5 million people in my 
state, some of the most affluent constituents who are represented in 
this body at all--saying we ought to totally repeal the estate tax. 
Even the wealthiest people in this country, who would be the 
beneficiaries of this, are asking us not to do this. This is fiscally 
unwise. It is going to cost us dearly.
  I was elected to this body 21 years ago. I remember what it was like 
in the early 1980s. I remember what David Stockman said after he left 
office. David Stockman, for those who have forgotten who he was, was 
the Director of the Office of Management and Budget under Ronald 
Reagan. He argued for significant tax cuts in the early 1980s. They 
passed, of course. We all know what economic havoc was caused during 
the 1980s when we had mounting deficits and a national debt that almost 
quadrupled in the space of 10 years. David Stockman, to his credit, 
wrote a book called ``The Triumph Of Politics.'' I don't have it with 
me today, but I urge the younger generation to read it. Remember the 
admonition, if you want to avoid repeating mistakes, read a little bit 
about previous mistakes, study history. David Stockman recites chapter 
and verse about the mistakes made with a proposal we couldn't afford.

  Pat Moynihan, then-chairman of the Finance Committee, argued for 
years that what was done was basically to manufacture a deficit. I 
suspect this is more about doing that than it is about providing tax 
relief; more about manufacturing a deficit, regardless of the 
consequences of that. Then, when people pay higher interest rates on 
their home mortgage rates, student loan rates, car payment rates, and 
everything else you can think of where an interest rate is involved, 
then that is considered irrelevant. If we can build up enough of a 
deficit, then we will not be able to invest in education, in health 
care. Forget about arguing whether or not we ought to do it, we will 
not be able to afford to do it.
  I suspect that may be the motivation here and not providing a tax 
break for 980 of my constituents under the best of circumstances. I am 
told there are actually 73 estates, when you get through with all the 
exemptions, 73 estates that would actually be affected by this 
proposal.
  I join with those who urge our colleagues today that, if we are 
reorganizing our Government differently to respond to what has happened 
here in the last year, if we have seen our surplus evaporate because of 
events that have occurred, investments we have had to make, if we must 
think differently about everything else we are doing, should we not 
pause and think differently about this? We should take steps to protect 
the family farms and small businesses from an estate tax that 
overreached, but just a few moments ago an amendment that would have 
done that was defeated. But what we are talking about now are just a 
handful of estates that would be asked to make contributions to our 
estate tax revenues. I urge Members to pause and think carefully here 
before committing our country to this kind of financial obligation, 
which we will spend years trying to recover from, in my view.
  In the 1990s, of course, when we came up with a balanced budget 
proposal, there were those who predicted dire consequences. We saw a 
nation eliminate the national debt, eliminate the deficits. A lot of 
people can claim responsibility for participating in that result: 
certainly the private sector, the technology sector particularly; 
certainly Alan Greenspan, the Federal Reserve Chairman who managed the 
Federal Reserve Bank with such brilliance; certainly President Clinton 
for being the Chief Executive Officer of the country and promoting a 
balanced budget approach that carried the thinnest of margins in both 
this Chamber and the other.
  Nonetheless, we found ourselves with a financial footing that people 
only dreamed about a decade earlier. What a great gift was given to 
this new administration. In fact, the President himself talked about it 
when he gave his State of the Union Message. In his first State of the 
Union Message, he spoke about why we are going to be doing the things 
we can do, it was because we had accumulated a sufficient surplus in 
this country. What a wonderful legacy it was going to be to invest in 
the things we needed to do.
  Now, because the recession lasted longer, because of 9-11, obviously, 
because of an unwise tax cut last year that went into place, we now 
find ourselves in a situation where we are going to have deficits every 
year of this administration's duration, and we are going to compound 
that by taking $840 billion off the table over the next 20 years at a 
time when we could be investing that money to make this a stronger and 
better country--just to take care of a small handful of people.
  What I would like to know is why are we not here talking about a tax 
cut that would say to working families, if you are sending your kid to 
college you ought to get some breaks on doing that, to make it easier 
for you to invest in your son's or daughter's educational future? Why 
aren't we talking about some relief there? Why aren't we talking about 
some relief from the FICA taxes for people? Here we are down here 
spending 6 hours debating whether or not 3,500 estates nationally, are 
going to get total repeal of an estate tax.
  I think it is unwise. I don't think it is warranted at all.
  I will end where I started. I am dumbfounded that this Chamber would 
even consider this proposal in light of the challenges, the risk, and 
the dangers we face as a nation--that we would make this kind of a 
judgment at a time when we are going to need all the resources we can 
provide for the well-being of our own people.

[[Page S5417]]

  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Mr. President, while the Senator from Connecticut is here, 
let me respond to the concern, or his expression that he is dumbfounded 
that we would even be considering this amendment.
  We passed this repeal already. I know the Senator from Connecticut 
didn't vote for it but a majority of us did--Democrats and Republicans. 
It passed in the House of Representatives, and the President signed it. 
This is not something extraordinarily odd that we are doing. This has 
already passed.
  The problem, as the Senator knows, is that under the rule in which it 
was considered, everything we did in the tax reform bill sunsets at the 
end of 10 years. As a result, the repeal of the estate tax comes in 10 
years. The question for those of us who helped pass this legislation--
the majority in the House and Senate, and the President--is, Did we 
really mean to repeal the estate tax?
  What I understand the Senator to be saying when he says he is 
dumbfounded is that at a time when he says we need the money, we would 
be making permanent that which we intended to make permanent but 
wouldn't make it permanent before.
  I suppose it is a legitimate question, if he is saying we should 
revisit what we did before. I take it that is what he means. He just 
voted, as did the Senator from Rhode Island, who spoke earlier, for an 
amendment that costs more than the Gramm-Kyl amendment. The Dorgan 
amendment, according to the Joint Tax Committee's calculation, costs 
$110 billion in the 10 years, which is substantially higher than the 
Gramm-Kyl legislation.
  I am a little confused about the point with respect to fiscal demand. 
There are fiscal demands. The ones mentioned by the Senator from Rhode 
Island--drug benefits, missile defense, and so on--are all in the Bush 
budget. Those are things we are paying for; they are provided for in 
the budget.
  The budget was established on the basis that we had repealed the 
estate tax. The question was, Would it be made permanent? It is not as 
if great circumstances have changed. We do have the war on terror, that 
is true. I don't think any of us is going to deny that if we need to 
fund the war on terror, we will. We have already passed a supplemental 
appropriations bill to do exactly that.
  It is odd to argue that the 1 percent of Federal revenues that are 
collected by the estate tax are critical to the functioning of the U.S. 
Government in light of the trillions of dollars that we spend--that 
somehow or other we can't get along without this so-called estate tax.
  That is the real question. I think Senator Gramm was right earlier 
when he said what it really boils down to is a philosophical debate 
between those who do not want to allow people to keep their own money 
but believe the Federal Government needs that money, on the one hand, 
and those of us who believe this is an unfair tax and the Federal 
Government can get along without the money.
  There is another point. I have made it before. Most of us appreciate 
the fact that when we cut taxes, in the long run it actually improves 
the fiscal picture for the Government because more taxes are generated 
by a more vital economy. I cited yesterday the economists who made the 
case that reducing taxes will allow more job creation, more capital 
formation, and a better economy. In fact, there would be about $40 
billion of growth in the economy if we were able to repeal the tax 
today.
  The other point made was that very few estates pay the tax, that it 
is only for the rich.

  This morning I read--and I will just briefly reiterate--who it is who 
pays the tax. Estates don't pay the tax, people pay the tax. Who are 
these people? This isn't the opinion of the Senator from Arizona, this 
is the IRS. They have the statistics on who actually pays.
  In the most recent report entitled ``Statistics Of Income Bulletins, 
Summer of 1999''--pages 72-76, if you want to look it up--here is what 
the IRS says. Here is who pays. It is divided between males and 
females. The largest group of filers of estate tax--27.7 percent--were 
men, administrators, upper management, and business owners. You could 
assume that. But the second biggest group--12.3 percent of filers--were 
schoolteachers, librarians, and guidance counselors. These are these 
filthy rich people from whom we have to take money--school guidance 
counselors, schoolteachers, and librarians.
  How about the female estate tax filers? The largest number--14.3 
percent--were educators.
  If I were a member of the teachers union, I would be down here 
supporting the Gramm-Kyl amendment to make repeal of the death tax 
permanent because the largest group of women who file estate taxes are 
educators. These are the people who actually pay the estate tax. The 
first person who accumulated the wealth is dead. He hasn't paid the 
estate tax. His heirs paid the estate tax. Who are these people? Among 
women, the second largest group, of 9.6 percent, are in clerical and 
administrative support occupations.
  When you put it all together, here is what the IRS says: A 
significant number of estate tax filers were scientists. We really 
ought to penalize those scientists. They do not do us any good. 
Salespeople, airline pilots, military officers, and mechanics. The last 
category I can understand--entertainers. Of course, we get a lot of 
money from entertainers. And we should. I don't know why they should be 
penalized any more than anyone else.
  Scientists, sales people, airline pilots, military officers, 
mechanics, teachers, guidance counselors, and librarians are the people 
who pay the estate tax.
  Maybe their dad was fortunate in life to be able to work hard, save 
money, and accumulate some wealth. But their dad's dream probably was 
that they would have a better opportunity in life than he did. He 
probably sacrificed a lot to be able to leave them some money.
  These are the people we are penalizing. We are not penalizing, by and 
large, some fat cat out on a yacht somewhere. According to the IRS, we 
are penalizing schoolteachers, airline pilots, and guidance counselors. 
That is whom we are penalizing.
  The Senator from Rhode Island made a point on which I really want to 
focus. He was absolutely half right. Unrealized capital gains, the 
appreciation in value of an asset which is not taxed as income, because 
you don't sell the property and, therefore, have to file an income tax 
return--you bought some stock, and over the years you keep it, and it 
gains in value, significantly unrealized capital gains. Until you sell 
it, you don't pay any tax.
  Under the current law, a billionaire got rich by investing in some 
stock. He never sold any of it. It acquired great value. He dies. His 
wife inherits that. The way it works today is, because there is an 
exemption for spouses, she pays no estate tax on it. The next day, she 
sells it. Do you know what her capital gains tax is? Zero. Do you know 
why? Under current law, there is what we call a step-up in basis. That 
property acquires an original basis as if it were the day of death 
rather than 20 years ago when the dead person bought the asset. When it 
is sold, there is no gain because the value begins with this much 
higher value--the stepped-up basis. If you sell it the next day, there 
is essentially a 1-day gain on it. In other words, there is virtually 
no capital gains tax. That is the current law.
  That is what opponents are defending. That is why I say the Senator 
from Rhode Island was right. This is wrong. But does the proposal of 
the Senator from North Dakota, which we will vote on next, do anything 
about that? No. Does the existing law, if we don't make it permanent, 
do anything about that? No. It is the Gramm-Kyl amendment that fixes 
that problem.
  This is what isn't understood by many of our colleagues. We don't 
simply repeal the death tax. We substitute for the death tax the 
capital gains tax. And we eliminate the step-up in basis, except for an 
amount which would be equivalent to the exemption today, which is about 
$5.6 million. Nobody would pay a capital gains tax who would also be 
exempt from the estate tax.
  But except for that amount of stepped-up basis, there is no step-up 
in basis. If the person who died and bought the stock years ago bought 
it for, let us say, $1,000, that is the original basis. Let us say it 
is now worth $1 billion. All right. Subtract $1,000 from

[[Page S5418]]

$1 billion, and that is the gain. That is on what they pay the capital 
gains tax. This is the proper way to tax unrealized capital gains. That 
is why our proposal really does not cost that much more, if you 
calculate it properly, than the existing law.

  When you eliminate the death tax and replace it with a capital gains 
tax, you have substituted good tax policy for the current bad tax 
policy.
  Death should not be a taxable event. We do not plan on that. We do 
not like that. It is not something that we cause to happen. It is like 
having your house burn down and collecting an insurance payment. We 
don't treat that as ordinary income because we realize you did not want 
your house to burn down. Even though you got an insurance payment for 
it, you should not have to pay that tax on that as ordinary income.
  It should be the same with what your father leaves you when he dies. 
You should not pay a death tax on that. What you should do is, when you 
sell that property, pay a capital gains tax on it, going back to its 
original value. That is how you tax unrealized capital gains.
  Now, just two final points.
  The Senator from Connecticut said only a small percentage of people 
are affected. That is not really true. There is truly a very large 
percentage of people affected, even though the number of people who 
actually pay the estate tax is relatively small.
  Let's take the average small business. I don't know what the size of 
the average small business is, but let's say it employs 50 people, just 
to use a number. Let's say you have an average family of four, plus 
other indirect beneficiaries, and so on. So instead of saying one 
person pays the estate tax, it affects all of the members of the 
family, and it affects all of the people in the business. There are 
twice as many people adversely affected as to who actually pays the 
tax. And in addition to the tax collected by the Government, an almost 
equal amount of money is paid by people to lawyers and accountants and 
for insurance to try to minimize their estate tax liability. So it is 
actually twice as much as people believe it is.
  I wonder. The bill that we considered before this bill had to do with 
hate crimes. Proponents of changing the hate crimes law acknowledged it 
affected a very few number of people. But the effect on them was 
significant, they said, and it was unfair that they would be treated as 
they were treated and, therefore, we needed to do something about this. 
In other words, this is a minority of people who are treated unfairly, 
and we need to have the Federal Government step in and do something 
about that.
  So, on the one hand, my colleagues on the Democratic side of the 
aisle are very concerned about a very small number of people, but when 
we bring to the floor the question of the death tax and its unfairness: 
Oh, we don't need to worry about that; that only affects a few people. 
Well, when something is unfair, and seriously wrong, it doesn't matter 
how many people it affects; we need to do something about it.
  The interesting thing to me is that 60 percent--this is a Gallup 
poll, and there are some polls that go up to 80 percent--at least 60 
percent of the American people agree the death tax should be repealed--
not reduced, not have the exclusions made larger, but should be 
repealed. And the interesting thing to me about that number is two-
thirds of those people believe it should be repealed even though it 
will never have any affect on them.
  In other words, they recognize it is not a large percentage of people 
who are adversely affected by the death tax directly, but they 
recognize it is unfair.

  To me, that says more about the American people than just about 
anything I can think of, when they say: Even though you have more 
wealth than I do, it is not fair for the Government to take half of it 
from your kids when you die. Therefore, even though it doesn't help me 
any, I am going to stand up for your right to be treated fairly. And I 
support the permanent repeal of the death tax.
  To me, that is a very good indication of the fact that the American 
people have a sense of fairness. And even though they are not directly 
benefitted by something, they are willing to support the elimination of 
that unfairness.
  Final point. The suggestion we have already taken care of the small 
businesses and family farmers and, therefore, we don't need to 
permanently repeal the death tax. We have been through that in debate 
earlier today. We have not taken care of the small businesses and 
family farmers. Unfortunately, as I said, something like two one-
hundredths of 1 percent of taxpayers have ever qualified for the 
exclusion that would take care of them under this provision. And even 
then, the IRS is going to come after you. And the IRS wins two-thirds 
of the cases that are brought. It is not a fact that small businesses 
and farms have been taken care of and excluded from the impact of the 
estate tax.
  So who pays? Average Americans because the wealthier person, 
remember, died. And the question is, Is it fair to make them pay?
  Do we need the money? The things that have been discussed are in the 
budget. We can always find more things to spend money on. The question 
is, Should you leave money in the hands of Americans who can build our 
economy, create jobs and wealth, or should we make the decisions for 
them by spending the money here in the Government?
  I think it boils down to that, and when we have this vote, we are 
going to be asking one simple question: For those who voted for the 
bill last year to repeal the estate tax, did they mean it or not? If 
they meant what they said, they will vote for the Gramm-Kyl amendment, 
which is the real repeal. It makes the repeal of 1 year into a 
permanent repeal. That is what the American taxpayers and American 
people thought we did. It is what we intended to do. And today it is 
what we can do.
  I urge my colleagues to support the Gramm-Kyl amendment.
  I now yield 5 minutes to my colleague from the State of Arkansas.
  The PRESIDING OFFICER (Mr. Corzine). The Senator from Arkansas.
  Mr. HUTCHINSON. Mr. President, I compliment my colleague from Arizona 
for his outstanding leadership on this issue. And he has been the 
leader on this.
  I was struck by one statement the Senator from Arizona made in which 
he said the American people, according to all the polls--and we all 
know this--overwhelmingly support the elimination of the death tax, 
even though most of them realize they will never be impacted by it. It 
does say a lot about the American people. It also says an awful lot 
about the unfairness of this tax; that is, the underlying tax.
  That is the basic issue at stake in the debate we are having. Is this 
the way we want to tax or not? It is not about whether or not we are 
going to lose money for the Federal Treasury or not. We may or may not. 
It is not about whether we can reduce the number of people impacted by 
this unfair tax by expanding exclusions and lowering rates.
  It is fundamentally about, Is this the right kind of tax to impose on 
the American people? The American people realize and recognize it is 
unfair for a person, a small businessperson, a farmer, for any American 
to work decade after decade, saving and investing, making decisions 
that reward their family, building something for the future, building 
something for future generations--someone, a businessman, a farmer, an 
individual paying property taxes, paying sales taxes, paying income 
taxes, year after year, and decade after decade--and then, at the point 
of death, at the event of death, you see the Federal Government reach 
into the grave and take half of everything that person worked for. I 
think the American people, rightly, have concluded that is unfair.
  As the Senator from Arizona also pointed out, the decision about the 
unfairness and about the need to eliminate this tax was already made. 
It was made by this body. It was made by the House. It was made by the 
President over a year ago--a year ago June 7. The decision was: It is 
unfair. Let's repeal it. Let's eliminate it.
  Because of arcane Senate rules, it could not be permanently 
eliminated. We could not do that last year. But we can do that now. The 
decision then that it was the right thing to do to eliminate it--that 
was made last year--we need now to say we really meant that.
  It has already been very rightly pointed out that this is not a tax 
that

[[Page S5419]]

affects only a few. It is not just a few fat cats we are talking about. 
We are talking about literally millions of Americans.
  According to the Treasury Department, more than 120,000 individuals 
filed death tax returns in the year 2000 alone. But that does not tell 
near the story because not only are there employees and family members 
who are impacted, but it is also the case that about twice as many 
people sell their businesses or sell their property early, before they 
die, so the death tax is not going to be a burden on their family. So 
instead of 120,000 individuals, you literally have doubled that, and 
suddenly you are talking about half a million people, plus their 
families and their employees who are impacted. This is not a tax that 
just touches a few people.
  In addition, even more Americans are forced to pay this tax, not to 
the Federal Government, but to lawyers, to accountants, and to life 
insurance agents. Privately held businesses get involved in estate 
planning because if they don't, all they have worked for will be 
eliminated. To ignore the death tax statute is suicide for a family 
business.
  Frankly, while the death tax is a terribly ineffective way to 
redistribute wealth, it is a very effective way to create and maintain 
an industry geared at avoidance.
  This tax generates very little real income for the Federal Treasury. 
My colleague has already pointed out that the Gramm-Kyl amendment, 
because of the way it handles untaxed capital gains and the way it 
changes the step-up provisions in current law, any impact upon Federal 
revenues will be far more minimal than that which has been estimated.
  In addition, the death tax is a very inefficient way of gaining 
Federal revenue, for 65 cents of every dollar gained is paid out in 
collection enforcement costs. Other studies have found not only are 
thousands of dollars going to attorneys and accountants and financial 
agents, but the average minority-owned business will spend nearly 
$28,000 a year on life insurance premiums to prepare for the death tax, 
and $9,000 on death tax planning.
  Frankly, the 1.5 percent of Federal income that currently is 
generated by the death tax is so small that it would, to a great 
extent, offset the cost of administering and collecting and enforcing 
the tax.
  Beyond all of that, I return to the point with which I began. There 
are the practicalities that it generates little income, and a whole 
avoidance industry has developed because of the estate tax.
  The PRESIDING OFFICER. The Senator has used his 5 minutes.
  Mr. KYL. I yield the Senator 1 additional minute.
  The PRESIDING OFFICER. The Senator is recognized.
  Mr. HUTCHINSON. Beyond the practicalities, the underlying issue is, 
is it fair? Is it right? A bigger exemption does not solve the basic 
unfairness. A greater exclusion, lowering rates, none of that really 
deals with the underlying issue. It is an unfair tax. It taxes success. 
It taxes accomplishment. It taxes that which is the American dream. For 
that reason, we need to get rid of it.
  We don't need a mirage for the American people. We need it to be 
real. We can make it real by supporting the Gramm-Kyl amendment.
  I thank my colleague for the time and the opportunity to speak in 
favor of his amendment.
  The PRESIDING OFFICER. The Senator from New York.
  Mrs. CLINTON. Mr. President, I yield myself such time as I may 
consume.
  The PRESIDING OFFICER. The Senator is recognized.
  Mrs. CLINTON. Mr. President, I have a great deal of respect for my 
colleagues who are arguing this point with extraordinary vigor and 
zeal. I have no doubt they absolutely believe that the wealth tax is 
wrong and should be abolished.
  We ought to take a step back and put this debate into a bit of a 
reality check again, since there has been a lot said on the floor which 
may be good argument points, good advocacy positions, but is not 
necessarily connected to the reality that we face today as we are about 
to vote on this decision.
  I don't usually come to the floor and quote the Wall Street Journal, 
but I will today because if one were to look for a source that probably 
views this issue more favorably to the position of my colleagues, they 
probably couldn't find a publication that would be more inclined to 
support it. Certainly the editorial pages have done so, and there are 
columnists and others who make the argument.
  I will enter into the Record a column that was written by one of the 
Wall Street Journal's leading writers, a gentleman by the name of Alan 
Murray, no friend of taxation, who wrote an article, dated May 28, 
2002, entitled ``Senate Needs Reality Check Before Refunding Estate 
Tax.''
  If one reads this, they will get a better context than the sort of 
disembodied one that occurs on the floor of the Senate where 
abstractions and generalities can be made for the sake of argument 
without really looking at what it is we are being asked to vote on.
  Mr. Murray starts by saying:

       Marie Antoinette had nothing over the U.S. Senate. In its 
     rush to permanently eliminate the estate tax, the nation's 
     ``deliberative body'' has apparently forgotten to deliberate 
     on the surging social trends of our time.

  Mr. Murray goes on to make the following point:

       The last two decades have led to a concentration of wealth 
     and income among the fortunate few in this country that 
     hasn't been seen since the gilded age.

  When was the estate tax first proposed and who proposed it? President 
Theodore Roosevelt, himself a product of the gilded age, who understood 
intuitively that our country, founded on principles of equality, could 
not afford to see vast disparities in wealth occur. Therefore, 
President Roosevelt, a Republican, proposed the estate tax, because he 
recognized the threat that greater and greater accumulation of wealth 
that separated the few from the many posed to our Nation.
  Mr. Murray goes on to say that ``the 10 most highly compensated 
corporate chief executives earned a total of $3.5 million in 1981,'' 21 
years ago. You take the 10 top CEOs in America. Were they doing a good 
job in 1981? They were doing a good job. But now 21 years later, the 10 
most highly compensated CEOs in our country make $155 million, almost 
45 times the 1981 figure. Are they doing a job 45 times better than 
they did 20 years ago? The argument would be hard to make.
  Secondly, we are currently in a situation where our market, the 
engine of economic growth, has been shaken by revelations about the 
behavior and conduct among these same highly paid corporate executives. 
We know, just to take one example, Mr. Skilling, the former CEO of 
Enron, would benefit to the tune of $55 million if the estate tax were 
repealed. How would that be paid for because the money is not fungible? 
If you do away with the estate tax, then you will have to eliminate or 
cut something. There are a lot of things that probably could be looked 
at to be cut. How about the Social Security tax payments of Americans? 
It would take 30,000 Americans earning $30,000 a year, paying their 
taxes, to make up for the $55 million that Mr. Skilling would 
benefit. I don't think that passes the fairness test. I don't think 
that is really the kind of choice we should be making in this body.

  Third, as Mr. Murray points out, every single day we are told our 
Nation is at war. I believe that. I represent New York. We were 
attacked when America was attacked. I have spent more time than I ever 
wish to recall working and being with the victims of that horrific 
attack.
  In the past, whenever our country has been at war, we have been 
called upon to sacrifice. Particularly, the affluent have been called 
upon to sacrifice because, as Theodore Roosevelt pointed out, you are 
so fortunate to live in America; there is not a place better devised in 
the entire history of the world to be successful, to become rich. And 
the rich, God bless all of us, they actually take more advantage of our 
system than anybody else. They are really lucky, fortunate, blessed to 
be in this country.
  The inheritance tax was created to finance the wars of the 19th 
century. The notion of repealing it, when we are under constant threat, 
when we have to spend billions of dollars to protect ourselves in ways 
we never had to think about before, strikes me as bizarre. We have 
voted on the floor of the Senate

[[Page S5420]]

for billions of dollars to protect our borders, our ports, our 
airports, our food, to be prepared against bioterrorism. I went to the 
White House this morning for the President's signing of the 
bioterrorism bill. It costs money to get the vaccines and do everything 
we need to do to protect ourselves and our children.
  The idea that, instead of calling upon the most fortunate among us, 
we would at this point in our Nation's history, rather than reform, 
repeal the estate tax flies in the face of what we have historically 
done. Why aren't we on the floor of the Senate asking that we close the 
loophole for the corporations that take advantage of the good times of 
being in our Nation and move their headquarters offshore so they don't 
have to pay any taxes? Unlike everybody else who works for a living, 
they want to avoid taxation. Yet they are more than happy to take 
advantage of our country's protection, security, and markets.
  What is wrong with this picture? Well, I agreed with Mr. Murray that 
we have to look at this and inject some reality into it. I have not 
even gotten to the budget deficit. Last year we had a budget surplus, 
and I listened to the debate and, honest to goodness, you can take 
transcripts from 1981 and put them right next to transcripts from 2002; 
it is the same rhetoric: slash the taxes and you will see more revenues 
coming in. That is what we were told in 1981. And in 12 years we 
quadrupled the debt of our Nation. Last year we were told again to 
slash taxes and we will have even greater surpluses. Now we are back 
into deficits, we are spending the Social Security surplus, and we are 
spending the Medicare trust fund surplus.
  It is pretty hard to explain how we are in debt and in deficit and we 
want to make it even worse, which of course shifts the burden not on 
the rich but on everybody else. If we were going to be talking about 
repealing taxes, there are taxes that affect far more Americans and 
really have an impact on the kind of lives that Americans lead. We 
could make the expanded childcare tax credit permanent. We could make 
the new 10-percent tax bracket permanent. We could pass the college 
tuition tax deductibility, which would be a huge benefit for most 
Americans--particularly middle-income Americans.
  Instead, we are debating the wealth tax. It is hard to understand why 
we are having this debate, except, with all due respect, my colleagues 
believe it is absolutely the most important issue we can be discussing 
at this time.
  Now, to be sure, the uncertainty posed by the tax cuts that were 
passed last year is a problem. But the reason they were passed in the 
form that they were passed is because the numbers would not work any 
other way and we were hoping to defy the laws of arithmetic.
  Many of us believe that raising the taxable limit is a good idea. We 
believe that reform is significantly possible without repeal. 
Responsible, affordable reform could save money, as well as continue 
both the principle and reality of providing a check on the kind of 
estates that Theodore Roosevelt and his relative Franklin Roosevelt 
warned us about.
  If one looks at all of the issues that we are confronting right now, 
I just hope we are going to take a deep breath and stop and say: 
Circumstances have changed since last spring. We don't have a surplus 
anymore. We are back into deficits. We are bleeding red ink. We have 
been attacked on our own shores. We have to fund our defense. We have 
to make sure our men and women in uniform, who are fighting for us in 
Afghanistan and elsewhere, are given every single piece of equipment 
and new technology that they deserve. We have to make sure our 
frontline soldiers, our police officers, our firefighters, the first 
responders, get the resources they need.
  And then we have longer term issues. We have all kinds of 
infrastructure problems we have to deal with that an individual cannot 
pay for on his or her own. We have to make sure our bridges and tunnels 
are safe.
  In a few weeks, we are going to debate what to do with nuclear waste. 
There is going to be a big issue about the safety of transporting it on 
our barges, along our waterways, on our railcars, and on our trucks. I 
am getting letters from rural parts of my State saying their bridges 
are not in good shape. So how can we do that?
  In our cities, our sewer systems and our wastewater treatment systems 
are not up to the kind of standards they should for ordinary treatment 
of waste and the provision of clean water, and now we have to worry 
about terrorism. So there is a list of pressing needs that will make us 
safer and stronger in the future. Repealing the estate tax is not on 
that list.
  Let me also say a few words about who it actually affects. I know my 
colleague from Connecticut was on the floor because he looked at the 
same statistics that are available to all of us. As he pointed out, he 
has 73 filers who were affected by the estate tax. We hear a lot about 
what happens to family farms, and I looked for any evidence I could 
find, and I know the Farm Bureau was asked to provide such evidence of 
any farm, anywhere, that had been lost because of estate taxes.
  Neil Harl, an Iowa State University economist, conducted that search 
and is quoted in an article in the New York Times last year. He said it 
is a myth. Since most farms in New York are worth less than a million 
dollars, even under the current law they are not going to have to pay 
estate taxes; and when we reform it and raise the limits, they 
certainly are not going to do so.
  I talked to one farmer and he said: I dream for the chance to have a 
farm worth enough that anybody would think I had to pay the estate tax.
  There is a lot of mythology and ideology that is being discussed in 
terms of the repeal of the estate tax, but I guess it really does come 
down to what are our priorities. If our priority is eliminating 
billions of dollars of tax obligations from the very richest people, 
then this is the vote for us. But if it is to protect our Nation's 
fiscal condition and get back on a path of fiscal responsibility, get 
back to where we are paying down our debt, not increasing the debt 
limit as was voted for yesterday, getting out of deficits, putting the 
money back into the Social Security trust fund, making sure we are 
prepared for the retirement of the baby boomers, dealing with health 
care, prescription drug benefits, the needs that both underinsured and 
uninsured people face to ensure they have health care when they need 
it, paying for that prescription drug benefit we promised our seniors, 
making sure we continue to fund our education policy so that we have 
the qualified teachers in every classroom, we have the equipment and 
the resources that every schoolchild deserves to have, then this vote 
is not for us.
  There are a lot of priorities at which we have to be looking. 
Repealing the estate tax would cost about $100 billion this decade, but 
in the next decade when people like me are starting to retire, then we 
are looking at a cost of $740 billion. It is hard to imagine from where 
the money to provide for Social Security and Medicare will come.
  The Jeff Skillings of the world and the other corporate executives 
who have a lot of money to start with--much more than any limit on the 
estate tax that we could imagine--why, they would be laughing all the 
way to the bank.
  I know a lot of Americans think they fall under the estate tax, and I 
give credit to the repealers who have turned Teddy Roosevelt on his 
head, have ignored the manifesto signed by several hundred of our 
wealthiest Americans, people such as William Gates, David Rockefeller, 
George Soros. They all said: Don't repeal it; reform it, but don't 
repeal it; it is bad for our country. I heard Warren Buffett, one of 
America's richest businessmen, say: It is bad for my family. I had to 
go out and earn my money the old-fashioned way. I do not want the kind 
of idle rich that has never been part of the American scene. That is 
something we did not want to have, and we turned away from it.
  The truth is, we do not have a death tax in America. There is no such 
thing as a death tax. People do not pay taxes at death. We have an 
estate tax, which is really a wealth tax that is based on people having 
a certain level of assets.
  Currently, it is $1 million. Many of us want to increase it 
significantly. At the present time, it affects less than 2 percent of 
the estates in our country. If we raised it to $3 million for an 
individual and $6 million for a couple and then in 2009 took it to $3.5 
million for

[[Page S5421]]

an individual and $7 million for a couple, we would have three-tenths 
of 1 percent of estates subjected to any tax.
  I also support setting a maximum rate of 50 percent. Then we really 
would be aiming at the Gateses and the Soroses and the Rockefellers and 
the people who have inherited a lot of wealth with an estate tax, and 
they still would have tens of millions of dollars.
  Mr. President, I thank my colleagues for the opportunity to speak. I 
ask unanimous consent that the Wall Street Journal and New York Times 
articles to which I referred be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

              [From the Wall Street Journal, May 28, 2002]

         Senate Needs Reality Check Before Refunding Estate Tax

                            (By Alan Murray)

       Marie Antoinette had nothing over the U.S. Senate. In its 
     rush to permanently eliminate the estate tax, the nation's 
     ``deliberative body'' has apparently forgotten to deliberate 
     on the surging social trends of our time.
       So let me provide a refresher course:
       (1) The past two decades have led to a concentration of 
     wealth and income among the fortunate few in this country 
     that hasn't been seen since the gilded age. Kevin Phillips, 
     whose new book ``Wealth and Democracy'' puts all this in a 
     historical context that should chill the spines of senators 
     preparing to vote ``yes,'' notes that the top 10 most highly 
     compensated corporate chief executives earned a total of $3.5 
     million in 1981. That rose to $155 million in 2001--almost 45 
     times the 1981 figure.
       (2) The nation is now experiencing a crisis of confidence 
     in these same highly paid corporate executives. Americans 
     tolerated sky-high CEO pay because they thought it reflected 
     the market value of talented managers--just as Michael 
     Jordan's pay reflected his draw at the box office. But 
     recently, the public has gotten graphic evidence that, in 
     some cases at least, CEO compensation had more to do with 
     greed, deception and even downright fraud. The proliferation 
     of stock options, which accounts for most of the huge 
     increase, was supposed to align the interests of corporate 
     managers with those of the shareholders. It did, it seems, 
     but in the wrong direction. Instead of working to make 
     shareholders rich, some executives were manipulating their 
     shareholders in order to make themselves rich.
       (3) The nation is at war. And in this country, wars always 
     have been times of sacrifice, particularly among the 
     affluent. The inheritance tax was created to finance the 
     wars of the 19th century. The notion of singling it out 
     for elimination in the midst of the current effort goes 
     against more than 150 years of American history.
       Notice that I haven't mentioned the budget deficit. That's 
     because on this score, at least, the Senate deserves some 
     credit. They are talking about singling out the estate tax, 
     at a cost of $99 billion from 2002 to 2012, in order to avoid 
     the whopping $373 billion price tag of the House bill that 
     would make all the provision in the president's tax cut 
     permanent.
       But in making this choice, the Senate should justify it. 
     Why deepen the deficit to pay for permanent repeal of the 
     estate tax, if you aren't willing to pay for permanent repeal 
     of marriage tax relief ($16 billion), a permanent extension 
     of the new 10% tax bracket ($79 billion), an expanded child 
     tax credit ($35 billion), or various forms of assistance to 
     people trying to pay the high cost of higher education ($5 
     billion)? All those tax cuts go to ordinary Americans 
     struggling to raise families and educate their kids.
       The Senate's answer? Let them eat cake.
       This is not a partisan matter. If estate-tax repeal didn't 
     have substantial support among Democratic Senators, it 
     wouldn't have a chance, given the need for 60 votes to 
     overcome a filibuster. There are already eight or nine 
     Democrats, including Senate Finance Committee Chairman Max 
     Baucus, who have indicated their support. Estate-tax lobbying 
     groups are working fervently over the holiday to win a few 
     more.
       Also, this isn't an ideological matter. The House 
     Republicans are the ideologues; they'll vote for any tax cut 
     that comes down the pike. Senators, in their pragmatism, bear 
     the burden of explaining why they have chosen this tax cut 
     above all others.
       To be sure, the estate tax cut enacted by Congress last 
     year is, in its current form, an atrocity. It would repeal 
     the tax for one year at the end of the decade, and then, to 
     satisfy Senate budget rules, reinstate it in 2011. This would 
     lead to some ghoulish estate planning, creating an incentive 
     for heirs to keep dad alive until 2010, and then pull the 
     plug by New Year's Eve.
       But that is hardly a good argument for permanent repeal. 
     Nor is the oft-heard refrain that this helps farmers and 
     small-business people who want to keep their enterprises in 
     the family. Those folks account for less than 10% of total 
     estate-tax revenue, and could be accommodated with measures 
     falling far short of total repeal.
       The only good news here is that Senate Majority Leader Tom 
     Daschle still has a good chance of holding enough of the 
     Democrats to keep the measure from getting 60 votes. If he 
     succeeds, he'll be accused, again, of obstructionism. But 
     this time, he'll be saving Senators of both parties from 
     excessive catering to big campaign contributors, and from 
     putting themselves squarely on the wrong side of history.
                                  ____


                       [From the New York Times]

               Focus on Farms Masks Estates Tax Confusion

                        (By David Cay Johnston)

       Wellsburg, Iowa.--Harlyn Riekena worried that his success 
     would cost him when he died. Thirty-seven years ago he quit 
     teaching to farm and over the years bought more and more of 
     the rich black soil here in central Iowa. Now he and his 
     wife, Karen, own 950 gently rolling acres planted in soybeans 
     and corn.
       The farmland alone is worth more than $2.5 million, and so 
     Mr. Riekena, 61, fretted that estate taxes would take a big 
     chunk of his three grown daughters' inheritance.
       That might seem a reasonable assumption, what with all the 
     talk in Washington about the need to repeal the estate tax to 
     save the family farm. ``To keep farms in the family, we are 
     going to get rid of the death tax,'' President Bush vowed a 
     month ago; he and many others have made the point repeatedly.
       But in fact the Riekenas will owe nothing in estate taxes. 
     Almost no working farmers do, according to data from an 
     Internal Revenue Service analysis of 1999 returns that has 
     not yet been published.
       Neil Harl, an Iowa State University economist whose tax 
     advice has made him a household name among Midwest farmers, 
     said he had searched far and wide but had never found a farm 
     lost because of estate taxes. ``It's a myth,'' he said.
       Even one of the leading advocates for repeal of estate 
     taxes, the American Farm Bureau Federation, said it could not 
     cite a single example of a farm lost because of estate taxes.
       The estate tax does, of course, have a bite. But the 
     reality of that bite is different from the mythology, in 
     which family farmers have become icons for the campaign to 
     abolish the tax. In fact, the overwhelming majority of 
     beneficiaries are the heirs of people who made their 
     fortunes through their businesses and investments in 
     securities and real estate.
       The effort to end the estate tax--which critics call the 
     death tax--gained ground when the House of Representatives 
     voted Wednesday to reduce the tax and then abolish it in 
     2011. The bill faces an uncertain fate in the Senate.
       The estate tax is central in the debate over taxes, not 
     only because the sums involved are huge but also because to 
     both sides it is a touchstone of national values. To those 
     seeking to abolish it, the estate tax is a penalty for 
     success, an abomination that blocks the deeply human desire 
     to leave a life's work as a legacy for the children. It is 
     also a complicated burden that enriches the lawyers, 
     accountants and life insurance companies that help people 
     reduce their tax bills.
       To its supporters, on the other hand, the estate tax is a 
     symbol of American equality, a mechanism to democratize 
     society and to encourage economic success based on merit 
     rather than birthright.
       Yet for all the passion in the debate, the estate tax does 
     not always seem broadly understood.
       While 17 percent of Americans in a recent Gallup survey 
     think they will owe estate taxes, in fact only the richest 2 
     percent of Americans do. That amounted to 49,870 Americans in 
     1999. And nearly half the estate tax is paid by the 3,000 or 
     so people who each year leave taxable estates of more than $5 
     million.
       In fact, the primary beneficiaries of the move to abolish 
     the estate tax look less like the Riekenas and more like 
     Frank A. Blethen, a Seattle newspaper publisher whose family 
     owns eight newspapers worth perhaps a billion dollars.
       ``Being ever bloodthirsty, the I.R.S. will start with the 
     highest value it can on my estate,'' said Mr. Blethen, the 
     55-year-old patriarch of the publishing family. The figures 
     for his share will probably be several hundred million 
     dollars, more than half of which would go to the government. 
     Mr. Blethen is trying to avoid almost all those taxes through 
     a plan also used by other wealthy families, but if he does 
     not succeed his sons' interest in the business will be wiped 
     out, he said.
       Estate taxes are paid by few Americans because they are not 
     assessed on the first $1.35 million of net worth left by a 
     couple. Amounts above this are taxed at rates that begin at 
     43 percent and rise to 55 percent on amounts greater than $3 
     million. As the Riekenas and the Blethens have learned, there 
     are many legal ways to reduce the value of one's wealth for 
     estate tax purposes. So even for the largest estates, the tax 
     averages 25 percent.
       Family farmers are often cited as victims. As Senator 
     Charles E. Grassley, an Iowa hog farmer and chairman of the 
     Senate Finance Committee, put it, ``The product of a life's 
     work leaches away like seeds in poor soil.''
       Yet tax return data show that very few farmers pay estate 
     taxes. Only 6,216 taxable estates in 1999 included any 
     agricultural land and equipment, the I.R.S. report shows. The 
     average value of these farm assets was $440,000, only about a 
     third of the amount that any married couple could 
     leave untaxed to heirs. What is more, a farm couple can 
     pass $4.1 million untaxed, so long as the heirs continue 
     farming for 10 years.

[[Page S5422]]

       In Iowa, the average farm has a net worth of $1.2 million. 
     Loyd A. Brown, president of Hertz Farm Management in Iowa, 
     which runs more than 400 farms in 10 states, said that while 
     he didn't know of anyone who had lost a farm because of the 
     estate tax, he thought Congress should either eliminate the 
     tax or increase the amount that could be inherited untaxed.
       Just 1,222 estates in 1999 had enough in farm assets to 
     make the farm property alone subject to estate taxes. But 
     these farm assets amounted to one-tenth of these estates, 
     suggesting that the tax applies mostly to gentleman farmers 
     and ranchers, rather than to working farmers like the 
     Riekenas, whose fortunes are tied up in their farms.
       As the Riekenas were surprised to discover, avoiding the 
     estate tax was easy. Their lawyer developed a simple plan 
     that involved making gifts to their daughters and buying life 
     insurance to offset any estate taxes that might be due if the 
     parents died before most of the farm had been turned over to 
     their daughters.
       There is a real cost, of course--payments to the lawyer and 
     for the insurance. And in any case the paucity of affected 
     farmers does not end the debate. Patricia A. Wolff, the Farm 
     Bureau's chief lobbyist, said the organization made estate 
     tax repeal its top priority because, while it has not 
     surveyed its members, she was confident ``the majority of 
     farmers and ranchers believe that death taxes are wrong and 
     that it is wrong to tax people twice on what they earn.''
       But Mr. Riekena and all two dozen other farmers interviewed 
     across central Iowa--every one a Republican--said that while 
     they favored increasing the amount that could be passed to 
     heirs untaxed, they did not support the repeal proposed by 
     President Bush and other leaders of his party. A few 
     snickered or laughed when asked whether the estate tax should 
     be repealed to save the family farm.
       But Senator Grassley himself opposes the estate tax, in 
     large part because he thinks that while a decision to keep or 
     sell an asset is an appropriate trigger for a tax, death 
     should not be.
       He added another reason: ``I do not think that the function 
     of government is to redistribute wealth.''
       Indeed, that seems to be the fault line in the debate: 
     should the government play Robin Hood with estates?
       ``If you worked hard and put your money away, you paid tax 
     on it as you went along, so it's yours and you should be able 
     to pass it on to your children without the government 
     penalizing you,'' said R. Elaine Gunland, who grows grapes in 
     Fresno, Calif., and whose family may owe estate taxes when 
     she dies.
       Mr. Blethen, the fourth-generation publisher of a newspaper 
     started in 1896 with $3,000, says he speaks for many others 
     in supporting repeal of the tax in the name of preserving 
     family businesses.
       ``I firmly believe that family-owned businesses are the 
     heart and soul of the country,'' said Mr. Blethen, who has 
     created a Web site called deathtax.com.
       Mr. Blethen says the estate tax benefits publicly traded 
     companies at the expense of family-owned businesses. The 
     reason is that the public companies can often buy family 
     businesses at a discount because the owners did not raise the 
     cash to pay estate taxes and must sell quickly at fire sale 
     prices.
       Mr. Blethen said some of the seven smaller papers his 
     family bought in Washington and Maine came from families that 
     had not planned carefully for the estate tax and decided it 
     was easier to cash out.
       ``If you like corporate culture, and think America needs 
     more of it, then you love the estate tax,'' Mr. Blethen said. 
     ``I think this march toward corporatism is not healthy and we 
     lost innovation, jobs and charitable giving.''
       Mr. Blethen said the estate tax also discouraged major new 
     investments in family businesses late in the life of the 
     primary owner because such investments consumed cash that 
     might be needed at any time to pay estate taxes.
       He said the estate tax also ``forces you into irresponsible 
     gift making'' to heirs. He felt compelled to give half the 
     future growth of his fortune to his two sons when they were 
     not yet kindergartners even though he had no way of telling 
     whether the boys would turn out to be industrious, as they 
     did, or scalawags.
       Despite his fierce opposition to the estate tax, Mr. 
     Blethen does not support President Bush's current plan to 
     repeal the tax because it would also exempt from capital 
     gains taxes the profits on assets passed to heirs when those 
     assets are sold. ``That's not fair,'' Mr. Blethen said.
       He said Mr. Bush's proposal would have the perverse effect 
     of encouraging the sale of family-owned businesses, because 
     heirs would see death as their chance to sell tax-free and to 
     diversify their portfolios, instead of continuing to bear the 
     risks of holding a single enterprise.
       Mr. Blethen thinks that rather than taxing an estate, taxes 
     should apply when a business is sold. ``YOu want to defer 
     those capital gains and let them grow so large that the 
     family will keep the business to avoid the capital gains 
     taxes,'' he said.
       The debate does not divide neatly among rich and poor. 
     Since February more than 800 wealthy Americans have joined in 
     a public appeal to keep the estate tax. They argue that 
     repealing the tax would further enrich the wealthiest 
     Americans and hurt struggling families. They also argue that 
     financial success should be based on merit rather than on 
     inheritance.
       Warren E. Buffett, George Soros, Paul Newman and William H. 
     Gates Sr., father of Microsoft's chairman, William H. Gates 
     III, are among the most prominent in that group, which also 
     includes many people with holdings of just a million dollars.
       Mr. Buffett said the estate tax fosters economic growth by 
     encouraging Americans to rise based on merit, not 
     inheritance. ``If you take the C.E.O.'s of the Fortune 500,'' 
     he said in an interview, ``and put in the eldest son of every 
     one of those who ran the place in 1975, the American economy 
     would not run as well as letting the Jack Welches, who 
     started out with nothing, rise to the top of General 
     Electric.''
       Back in central Iowa, Mr. Riekena had another reason. He 
     said Washington was focused on the wrong issue when it came 
     to saving family farms.
       ``For most farmers around here, the estate tax is not high 
     in their minds,'' Mr. Riekena said. ``What we need are better 
     crop prices.''

  Mrs. CLINTON. Mr. President, rather than one day raising the debt 
limit without any plan to get us out of debt, except continuing to 
believe in the god of supply-side economics, which did not work so well 
20 years ago, and instead of repealing the wealth tax without any plan 
for dealing with our problems, like a war and Social Security and other 
significant issues we confront, I hope we will opt for the more 
responsible way of reforming the estate tax and make it clear that the 
reality check in this body demonstrates clearly we cannot afford it. It 
would be the wrong decision, and we have other priorities that we need 
to get about the business of addressing. I thank the Chair. I yield the 
floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Arizona.
  Mr. KYL. Mr. President, before yielding, I ask unanimous consent to 
have printed in the Record two editorials from the Wall Street Journal, 
dated June 10, 2002, and February 22, 2001, both of which demonstrate 
support for the permanent repeal of the death tax.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, June 10, 2002]

                         The Death Tax Senators

       We are about to find out how many of the 12 Senate 
     Democrats who voted for tax cuts last year really meant it. 
     They'll get the chance to provide their sincerity when the 
     Senate takes up a vote to make repeal of the death tax 
     permanent, perhaps this month. Last Thursday, 41 of their 
     Democratic counterparts in the House joined the 256-171 vote 
     to make this punitive tax disappear forever.
       Majority Leader Tom Daschle first tried to forestall a 
     Senate vote, because he knows a clear majority favors passage 
     there too. But he was forced to give in recently in return 
     for some concessions on the energy bill. So now he's trying 
     to hold off Senate passage with a filibuster that requires 60 
     votes before it can get to President Bush's desk. Supporters 
     of permanent repeal figure they have at least 58 votes, and 
     Mr. Daschle has been twisting arms to block what is the will 
     of many even within his own party.
       Almost every Republican voted for repeal the first time 
     around, though Vim Jeffords has since sold his vote for dairy 
     subsidies. Liberal Rhode Island Republican Lincoln Chafee, is 
     also in doubt, as is John McCain, who voted against President 
     Bush's original tax cut and moves further let by the month; 
     maybe the Arizonan should consider truth-in-advertising and 
     jump to Team Daschle.
       The complete gang of 12 Democrats who voted for the tax cut 
     last year is listed in the table nearby. Six are up for re-
     election this November, and to their credit three of those 
     running have already said they'll vote for repeal. It's 
     probably no coincidence that all three are running in 
     conservative states carried by Mr. Bush in 2000 and all of 
     them face more than token competition this year.
       Two others running in November, New Jersey's Bob Torricelli 
     and Louisiana's Mary Landrieu, have already flip-flopped and 
     announced intentions to vote against permanent repeal. Their 
     excuse is that things are different now that the country is 
     facing budget deficits and wartime expenses. But it's far 
     more likely that they've changed because their re-election 
     opposition has since all but collapsed. Mr. Torricelli was 
     especially fond of just about any tax cut in his taxophobic 
     state, until Justice declined to indict him for accepting 
     illegal gifts and he concluded the New Jersey GOP couldn't 
     muster serious opposition.
       One vote still in the balance is Missouri's Jean Carnahan. 
     She faces a strong challenge this fall from Republican Jim 
     Talent, who has made the death tax a central issue in his 
     campaign. She's doing a remarkable dodge and weave, claiming 
     to favor repeal for small businesses and farms but she is 
     undecided on the repeal that passed the House. Sounds to us 
     as if she's waiting for orders from Mr. Daschle; if he 
     doesn't need her for his filibuster, he'll give her a pass to 
     vote yes and remove the issue for November.
       One virtue of this death-tax debate is that is reveals 
     what's really at stake in this November's Senate races. If 
     Mr. Daschle retains

[[Page S5423]]

     his Democratic majority, further tax cutting is dead. But if 
     Republicans pick up a mere one seat, for a 50-50 split, 
     they'll be able to organize the Senate with the help of Vice 
     President Cheney's vote and tax-cutting becomes possible 
     again.
       Mr. Daschle gave his Bush-state Democrats a tax-cut pass 
     last year, but the perversity of Senate budget rules meant 
     the tax cuts end after 10 years. This is crazy tax policy, 
     since it increases uncertainty and would amount to the 
     largest tax increase in history in 2010 if the law isn't 
     changed.
       It is absolutely insane in the case of the estate-tax 
     repeal; the death tax declines slowly over the next seven 
     years, disappears entirely in 2009, but then snaps back to 
     its confiscatory 55% pre-Bush rate on January 1, 2010. So 
     forget about rational estate planning. Far from the tax on 
     the uberrich that Dems claim it is, only 5,200 of the 116,500 
     tax returns filed in 1999 were for estates worth more than $5 
     million. In any case, the main argument for repealing the 
     death tax isn't economic, but moral. It's unjust for the 
     government to double tax away, at death, the fruits of a life 
     of work and thrift.
       The death-tax repeal vote is also about truth in politics. 
     A year ago these Senators voted to repeal the death tax, but 
     only with a wink and an asterisk that it would all come back 
     after 10 years. No wonder voters are cynical about 
     politicians. The next death tax vote will separate the 
     cynical from the sincere.


                             The Gang of 12

       A dozen Democratic Senators voted last year for the 
     temporary repeal of the death tax.
     Against
     John Breaux (La.)
     *Mary Landrieu (La.)
     *Robert Torricelli (N.J.)
     For
     *Max Baucus (Mont.)
     *Max Cleland (Ga.)
     Dianne Feinstein (Calif.)
     *Tim Johnson (S.D.)
     Herb Kohl (Wis.)
     Blanche Lincoln (Ark.)
     Ben Nelson (Neb.)
     Zell Miller (Ga.)
     Undecided
     *Jean Carnahan (Mo.)

     *Up for re-election this year
                                  ____


             [From the Wall Street Journal, Feb. 22, 2001]

                            A Tax on Virtue

       Maybe you have to be a billionaire to appreciate the 
     argument for keeping the estate tax.
       A newspaper ad signed by Bill Gates Sr., George Soros, 
     David Rockefeller and more than 200 other money-bags has just 
     warned that repealing the estate tax ``would have a 
     devastating impact on public charities.'' We live in strange 
     times indeed when the ethical case for keeping a tax rests 
     upon a collection of fat cats talking about the things they 
     will do to avoid paying it.
       Of course, they don't really have an economic argument. 
     Anyone who looks at the numbers knows that the death tax 
     amounts to only about 1% of all federal revenues. But that 
     figure doesn't begin to get at the actual and opportunity 
     costs involved in collecting it. When the Joint Committee on 
     Taxation looked into the issue two years back, it found these 
     costs staggering: punishing savings, encouraging consumption 
     and costing almost as much in compliance as it takes in.
       What about the moral argument? Everyone knows about sin 
     taxes--taxes on cigarettes, alcohol, etc. Well, a death tax 
     is a tax on virtue. It's tax on those who've worked hard, 
     saved well and in most cases have already paid taxes on their 
     wealth at least once and probably twice.
       It is also responsible for a whole tax-avoidance industry, 
     which takes in millions itself from the 200 well-heeled 
     individuals in Sunday's ad. Put simply, if you really are 
     rich enough you can have your cake and pass it along to your 
     heirs too. But if you can't afford to pay the legions of 
     estate lawyers, trust fund accountants and life insurance 
     underwriters, your heirs will be forced to sell off what 
     you've worked so hard to build up to pay off the IRS man 
     waiting outside your funeral for his take.
       So if the death tax really isn't all that significant for 
     the government, why the opposition to getting rid of it? the 
     answer is that the death tax was never about money. It is 
     about envy and the corrosive philosophy it feeds. This is the 
     philosophy Senator Tom Daschle invokes when he talks about 
     Americans in terms of those whose tax cuts will let them buy 
     a Lexus and those who supposedly will get no more than a 
     muffler. The death tax is their favorite, the name of the 
     game being to stoke the flames of resentment among the 98% of 
     Americans who don't pay this tax against the 2% who do.
       Their problem is that the public isn't buying. No matter 
     how they are worded, polls show Americans instinctively 
     understand there is something rotten about a government that 
     would confiscate half of what you've worked hard to build 
     up. This month a McLaughlin & Associates poll reported 
     88.5% of Americans saying the death tax is unfair, and 
     nearly as many favoring its abolition. A Zogby/O'Leary 
     report clocked in with 86% declaring the tax is unfair. A 
     Portrait of America survey from last July even had 59% of 
     Gore supporters wanting the tax killed. Given that the 
     vast majority of Americans know that the death tax won't 
     affect them personally, opposition to the tax is a pretty 
     strong statement about ideas of fairness and morality.
       Within the Bush Administration there are murmurs about 
     giving up on abolishing the estate tax in the hopes of 
     getting the President's other cuts through, and there have 
     already been some defections in the GOP ranks. This would be 
     a grave miscalculation. In his acceptance speech in 
     Philadelphia in August, George W. Bush said that his own 
     position was based on the ``principle'' that ``every family, 
     every farmer and small businessperson should be free to pass 
     on their life's work to those they love.'' In the next breath 
     Mr. Bush stated that ``on principle'' he also couldn't see 
     why anyone ``in America should have to pay more than a third 
     of their income to the federal government.''
       These are good, sturdy principles for President Bush to 
     stand on. In the election one of the defining differences 
     between George Bush and Al Gore was that the former 
     understood you don't make poor people better off by making 
     rich people poorer. You help poor people by giving them a 
     stake in the system that makes rich people wealthy. In the 
     past only the wealthiest Americans have really been in a 
     position to give their children and grandchildren advantages 
     by transferring wealth. But a booming stock market and the 
     growth of 401k plans means that American families of even 
     modest incomes might leave a legacy for their children. 
     Billionaires might not understand this, but ordinary 
     Americans clearly do.
       Within this context the death tax should be seen for what 
     it really is: the flag of convenience for the Beltway's class 
     warfare brigade. They know all too well that if they can't 
     sell envy on an inheritance tax, they can't sell it at all. 
     The real danger for the President is a halfway measure that 
     would deprive him of victory and foster a reputation as a 
     tinkerer rather than a reformer. ``The only way to eliminate 
     the unfairness of the death tax,'' says Rep. Jennifer Dunn, 
     sponsor of last year's legislation, ``is to end it once and 
     for all.''

  The PRESIDING OFFICER. Who yields time? The Senator from Oklahoma.
  Mr. NICKLES. Mr. President, let me make a couple comments before the 
Senator from New York leaves. We passed legislation recently to help 
the victims of terrorism, including New York City and Oklahoma City, 
and we reduced their estate tax. I think we exempted estates basically 
under $8 million and said if they have an estate over $8 million, it 
would be 18 to 20 percent which, in my opinion, is what the maximum 
death tax should be.
  I heard my colleague say there is not a taxable event on death. I 
happen to disagree. If someone dies, it is a taxable event under 
current code. Some of us are trying to say a taxable event should not 
be when somebody dies, but when the assets are sold and sold 
voluntarily, that means the people initiated a transaction and know 
what the tax will be.
  Current law is when someone dies, it is a taxable event. They tax the 
estate up to 50 percent. My colleagues want to exempt estates of $3 
million or $4 million, maybe $7 million if it is a couple and they both 
die at the same time, but we want half of it after that. The Conrad 
amendment is not 50 percent, it is 55 percent, if you have a taxable 
estate between $10 million and $17 million.
  Fifty-five percent is over half; 50 percent is half. That is a lot. 
Why should the Federal Government be entitled to take half of 
somebody's property if they happen to have an estate of $20 million?
  How is it right to say to New York City and Oklahoma City--your tax 
rates should be 20 percent for victims, but everybody else has to pay 
50 percent? If somebody has three or four restaurants or they have a 
very large ranch or a nice successful real estate business they are 
building and growing and their kids want to continue it and we fail to 
pass the Gramm amendment, we are basically saying that a tax $3 million 
is enough and maybe $7 million if combined. We are asking the Federal 
Government to come in and take half. This family exclusion proposal, 
which was not adopted earlier, would not work.
  I am embarrassed for my colleagues to say they believe in free 
enterprise but free enterprise up to an estate of $3 million, and above 
that the Federal Government gets half; that the Federal Government 
should confiscate half the property because somebody passes away.
  We are saying: No, let's not have a taxable event at death; rather, 
let's have a taxable event when the property is sold. And when the 
property is sold, you pay the 20 percent capital gains

[[Page S5424]]

tax. This eliminates lots of legal time and expenses trying to avoid 
this unnecessary tax.
  Somebody said: What about the Rockefellers? They do not pay the 
taxes; they set up foundations. That is what Mr. Gates is doing. That 
is what the very wealthy people do. They do not pay this tax. The 
people who pay it are the people who have the farm, the ranch, the 
small business and somebody dies unexpectedly--I know because it 
happened to my dad--and Government comes in and says: We want half.
  Unfortunately, if we adopt the Conrad amendment, the Government will 
continue taking half. I think it is unconscionable. We should reduce 
the rates, not just increase the exemption. This only applies to 1 or 2 
percent. We should cut the rates to 20 percent, cut it to a voluntary 
transaction, cut it to a capital gain. Then we have solved the problem; 
we have eliminated the problem.
  This is a terrible tax and it is unfair. We are making countless 
thousands of people not grow their business, not expand because they 
know they are going to be compiling problems for the future. Why build 
and expand if you are going to be giving half to the Government and 
maybe causing all kinds of litigation for your children? Why double, 
why build, why expand, why grow? I know many people who have worked 
hard to made enough to get along and live a comfortable life. This tax 
should not ruin these years of hard work.
  We should change this tax, and do it by adopting the Gramm-Kyl-
Nickles amendment. I encourage my colleagues to vote in favor of this 
amendment and oppose increasing the exemption and then sock it to them 
and have the Federal Government take half the estate if it happens to 
be over this deductible amount.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I rise today to support permanent repeal 
of the estate tax. Permanent repeal of the estate tax will help boost 
Montana's economy and will help boost America's economy, create jobs, 
and protect the heritage of our farmers and ranchers.
  As chairman of the Senate Finance Committee, I was proud to help 
write last year's tax cut, which included a number of good changes to 
the estate tax, including increasing the unified tax credit and 
restructuring the rates.
  Now it is time to go further. As the law currently stands, the estate 
tax will be fully repealed in 2010.
  It will return to 2001 levels the next year, 2011. Let us use some 
common sense. Estate tax is a prime example of a tax that dampens 
efforts to create more jobs in Montana and across the country, and that 
is what this is all about, creating more jobs.
  My State is a small business State, an agricultural State, a State of 
family-owned farms and ranches, a place where main street businesses 
are still family owned. It is important to Montanans to be able to pass 
on their businesses, their farms, their ranches, to their sons and to 
their daughters.
  I support the Gramm-Kyl amendment to eliminate the sunset of the 
estate tax, to permanently repeal the estate tax, to free up money to 
help families, family-owned businesses, farms, and ranches. Permanent 
repeal of the estate tax will allow families to better plan 
particularly for the continuity of their estates.
  Our family-owned businesses, farms, and ranches are the backbone of 
my State. I do not know another State that is a more small business 
State than mine. It is also the backbone of America, I might add--small 
business.
  Family-owned businesses are our country's heritage, and it is up to 
us to protect that heritage. Full, permanent repeal is the right thing 
to do for our farmers, for our ranchers, for hard-working small 
business owners. It is the right thing to do for the Nation, and most 
certainly permanent repeal is the right thing to do for Montana.
  I urge the Senate to support permanent repeal of the estate tax for 
this generation and generations to come.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRAMM. Mr. President, on the two previous amendments, we have 
afforded the authors of the amendments the ability to close the debate. 
We would like to preserve that right for ourselves in this debate on 
our amendment. So what I would like to do is to ask those on the other 
side who want to come and speak to do it, so we can take our remaining 
time to use at the end to close out the debate.
  There is no rule that says it has to be done that way, but when we 
closed out the debate on the Dorgan amendment, he had the last 11 
minutes. When we concluded the debate on the amendment of the senior 
Senator from North Dakota, he closed out that debate. So if we could do 
it that way, we would like to do it. It seems reasonable to us. If 
anybody objects, obviously we can talk about an alternative.
  Mr. GRASSLEY. Mr. President, as you know, for as long as I have been 
in Congress, my belief is that no American family should be forced to 
pay over half of their savings, their business, or their family farm in 
taxes when they die. No taxpayer should be visited by the undertaker 
and the tax collector at the same time.
  With the President's support we have helped those families we care 
about, this Senate voted by a wide majority to help those families who 
are being crushed under the expensive responsibilities of estate tax 
planning and estate taxes. I have heard the concerns of the people in 
Iowa and the American people, and this Congress voted to repeal the 
``death tax.''
  Now, the Democrat leadership wants to take that all away. Once again 
they want to take more then half of a family's assets because someone 
has died. The Democrat leaders just want to spend your money. Well, 
folks, that is not right. Death is not a taxable event.
  We have the chance today to make death tax repeal permanent. We have 
heard from the brave men and women who fought World War II, they fought 
for democracy and then came home to help fuel the economy that created 
this wealth. They are dying by the thousands everyday, now they want 
the death tax to die forever. That means for the first time, American 
taxpayers, who are good Americans, who saved and invested in savings 
accounts and stocks and bonds will be treated equally with all other 
taxpayers. It means, that for the first time, American farm families 
and the owners of small businesses will not have to jump through hoops, 
hold their breath, and pray they did it right, subject to audit, in 
order to know they will not have to pay death tax.
  Last year we repealed the death tax, effective for anyone dying after 
December 31, 2009. If not for budget constraints we would have repealed 
it sooner, but at least today we can vote to make the repeal permanent. 
We will be able to start a new decade with no death tax to burden the 
future generations. By repealing the death tax we will save thousands 
of family-owned businesses and in turn saving the jobs of hundreds of 
thousands of employees when family businesses are faced with death tax.
  We have heard the American people, we have reformed and repealed the 
death tax. I urge all of my fellow Senators to repeal the sunset so 
death tax will be dead once and for all. Beware of all these Democratic 
amendments that try to once again make the law murky and complex. Keep 
it simple and fair--repeal the sunset. Make death tax repeal permanent.
  Mr. SMITH of New Hampshire. Mr. President, the estate tax, better 
known as the ``death tax,'' is an onerous tax that should be 
eliminated. A recent poll revealed that 77 percent of the voters 
believe that the tax is unfair.
  This tax is slowly destroying family businesses by slowing growth. 
And it is unfair that families who have worked their entire lives to 
build a successful family farm or business should be penalized.
  Individuals who look forward to leaving something behind for their 
children should not be punished by confiscatory, anti-family taxes.
  In fact, after years or even generations, children are often forced 
to sell the family farm or business just to pay the tax. This is both 
unfair and unconscionable.
  However, not only is it the children who must suffer the loss of the 
family business, but the workers and their children who suffer when 
they lose their job because the business they've been working at is 
liquidated to pay the death tax.

[[Page S5425]]

  But it doesn't stop there. The local community, particularly small 
towns, suffer as well because their customers can no longer afford to 
buy their products after having lost their job.
  The estate tax is outdated, it raises little money, and it imposes a 
large cost on the economy.
  In 1999 the estate tax generated about $24 billion. However, it is 
estimated that administrative costs to enforce the tax are over $36 
billion.
  A recent analysis by the Heritage Foundation found that the U.S. 
economy would average nearly $11 billion per year in additional output 
if this tax were abolished.
  The National Association of Manufacturers states that 40 percent of 
it's members had spent more than $100,000 on attorney and consultant 
fees related to death tax planning. In addition 3 out of 5 members pay 
at least $25,000 a year to prepare for the death tax.
  A 1998 study by the Joint Economic Committee found that if the death 
tax was repealed, as many as 240,000 jobs would be created and 
Americans would have an additional $24.4 billion in disposable personal 
income.
  A February 2000 study by the National Association of Women 
Entrepreneurs found that the death tax has a negative impact on female 
entrepreneurs.
  According to the study, business owners found that female 
entrepreneurs spent, on average, nearly $60,000 on death-tax planning.
  So who pays the death tax?
  We all do. We pay it through lower wages and fewer jobs. In high-
unemployment regions or rural areas such as the North Country of New 
Hampshire and elsewhere, the death tax destroys badly needed jobs 
before they are created.
  We pay it through the destruction of our communities. In hundreds of 
American towns, small family-owned businesses are struggling to survive 
against the competition provided by large corporate retailers.
  Home Depot doesn't pay the death tax. The family-owned hardware store 
does. The death tax accelerates the transfer of wealth from the owners 
of small businesses to the owners of large, public corporations.
  And we pay it through slower growth and less wealth. Study after 
study shows the death tax reduces savings, lowers investment, and 
restricts the capacity of the economy to grow. The death tax literally 
confiscates capital, the lifeblood of any economy. That means lower 
incomes and fewer opportunities for ourselves, as well as our children.
  Death tax supporters argue we cannot afford to repeal this tax. All 
the evidence suggests just the opposite. We cannot afford to continue 
this destructive tax.
  So who's left holding the bag, the middle-class.
  This tax is unfair and it is anti-family. We must repeal this tax 
now. I strongly urge passage of this legislation.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. CONRAD. 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. CONRAD. Mr. President, I yield 4 minutes to the Senator from 
Minnesota.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. WELLSTONE. Mr. President, first let me rise to disagree with my 
colleague, the chair of the Senate Finance Committee. In the State of 
Minnesota, in 1999, there were 636 families who paid the estate tax. If 
we pass the Conrad amendment, which says for a family we are targeting 
$7 million, we will have exactly 36 families left in our State who will 
be paying this tax.
  We had the Dorgan amendment that said if someone is going to be a 
family farmer or have a small business, and they are going to pass it 
on, and one is going to take over the farm and the small business, they 
are exempt. That is what it is all about when it comes to fairness.
  Instead, what we have is a proposal that I yesterday labeled win/win 
or lose/lose, dependent upon one's values and priorities. If one 
believes they should bleed the economy over the next 20 years to the 
tune of a trillion dollars, and all of those benefits will go to 
multimillionaires and billionaires, and at the same time have to raid 
the Social Security trust fund--we just raised the debt ceiling $450 
billion, and some of my colleagues who voted against it are voting for 
eliminating this tax. So if they believe the benefits should go to the 
top of the top of the top, and in addition they want to bleed this 
economy to the tune of a trillion dollars over the next 20 years so we 
will not be able to live up to our Social Security obligations, we will 
take it out of the Social Security trust fund; we will not have the 
money for affordable prescription drug coverage; we will not make the 
investment in the health and skills and intellect and character of 
children; we will not invest in education; there will be nothing for 
affordable housing; we will not be able to do anything about deplorable 
conditions in nursing homes. If they believe this and believe there is 
nothing the Government can or should do, this is win/win.
  I said it yesterday. This is lose/lose for the people of Minnesota. 
This is lose/lose for probably 99.99 percent of the population. This is 
lose/lose for people who believe we should have tax fairness, that we 
should target these breaks to small businesses and family farmers. This 
is lose/lose for people who believe there is a role Government can play 
when it comes to the improvement of people's lives and that we have an 
important challenge before us: Affordable prescription drugs, good 
education, investment in our schools, our children, making sure Social 
Security will be there for people. These are the priorities.
  This proposal is very clear in what its ultimate goal is, which is 
above and beyond massive tax unfairness. It will so erode the revenue 
base and will prevent any initiative in these areas: Prescription drug 
coverage, education, health care coverage, affordable housing. By 
definition, it is fiscally irresponsible. So on both counts, it is a 
massive subsidy, an inverse relationship to need.
  All together, 36 families in Minnesota will not be helped if we go 
forward with the Conrad proposal. If we had gone forward with the 
Dorgan proposal, every family in Minnesota but 36 families would be 
helped. This proposal is so skewed toward the top of the top of the top 
and at the same time undercuts our ability to make any of the 
investments we need to make to do better as a nation.
  I hope my colleagues will vote against the Gramm proposal and will 
vote for the Conrad amendment.
  I yield the floor.
  Mrs. MURRAY. Mr. President, the estate tax is bad for businesses. It 
is bad for workers and new job creation. And it is bad for our 
communities who are watching their local, family-owned businesses get 
swallowed up by large corporations. Therefore, I wish I could have 
supported the estate tax repeal amendment debated today.
  For the last 7 years, I have worked to address the problems with the 
estate tax. I introduced legislation in 1995 to reform the estate tax, 
and I voted for the 1997 tax bill that made it easier for family farms 
and small businesses to transfer their assets to the next generation. 
In 2000, I cosponsored legislation by Senator Jon Kyl and former 
Senator Bob Kerrey to repeal the estate tax. I voted for similar 
legislation later that year. I believe the Kyl-Kerrey bill made a 
critical contribution to the estate tax debate. It was a middle ground 
that essentially substituted an estate tax when an asset is transferred 
at death with a capital gains tax when an asset is sold. In my opinion, 
that is a fair approach.
  For me, estate tax repeal is about protecting and creating jobs, 
strengthening locally owned businesses, and protecting the environment. 
When a business owner spends thousands of dollars each year on estate 
tax planning, that is less money the owner invests in employees and the 
business. When family businesses are sold, they are often purchased by 
large corporations, not by other locally owned businesses. When timber 
lots or farms are sold, there is a good chance that land will be eaten 
up by strip malls or other development, and not kept as open

[[Page S5426]]

space. For the reasons I just outlined, a vote for repeal would have 
been the easy road to travel today.
  My constituents did not elect me to the Senate to take the easy road. 
They elected me to make tough decisions. As much as I believe the 
estate tax is a bad tax, I believe passionately that we have a 
responsibility to balance the government's books. Just as the estate 
tax hurts businesses and jobs, so does chronic deficit spending by the 
Federal Government.
  During the last 2 days, some of my colleagues have argued for 
permanent estate tax repeal. Not one of them has told me how we will 
pay for it. Last year's tax cut blew open the budget while not making 
estate tax repeal a high priority. Our budget problems were made worse 
by the recession and September 11 terrorist attacks. Clearly, we are in 
a different place than we were 2 years ago.
  The country deserves a debate on how we balance estate tax repeal--or 
other aspects of last year's tax law--with our other obligations. We 
must address our homeland security needs, whether it is strengthening 
airline and port security, improving operations at our borders, or 
making sure our troops in the field have the training and resources 
they need. Our constituents are also demanding action on issues that 
were important prior to September 11. Health care is a crucial issue 
for individuals and families, and to the businesses who support estate 
tax repeal. In addition, we cannot lose sight of long-term investments 
in education, job training and infrastructure. Given what is at stake, 
we do a disservice to the American people if we simply tell them they 
can have it all. We have to make choices, and last year the 
administration and Congress chose not to make estate tax repeal a 
priority.
  While I could not support the estate tax repeal amendment offered by 
Senators Gramm and Kyl, neither could I support the amendments by my 
Democratic colleagues. While well intentioned, I believe the nation has 
moved beyond whether we should repeal the tax. To me, it is not a 
question of if, but when we repeal the tax and how we pay for it. The 
alternative amendments offered today would have taken us backwards.
  Today is not the last time we will debate estate tax repeal. Between 
now and the next estate tax vote, I believe Congress and the 
administration need to reach agreement on a basic budget framework that 
makes room for estate tax repeal. Unless we repeal the estate tax in 
the context of a budget agreement, we will just be playing politics 
instead of making real progress
  Mr. FEINGOLD. Mr. President, I strongly support permanent estate tax 
reform. Though I do not support completely repealing the estate tax for 
all estates, I do believe that we should significantly expand the 
unified credit to exempt the great majority of estates from taxation, 
and we should do so on a permanent basis. We should also include an 
indexing provision to ensure that the unified credit does not become 
obsolete and burdensome again, as happened over the past several 
decades.
  But we should make these changes in a fiscally responsible manner. We 
should do so without adding to the already enormous budget deficits 
that were largely the result of the tax bill that was enacted last 
year.
  Our budget position is poor, and it is getting worse. Last year, 
Congress passed a fiscally irresponsible tax cut that has shoved us 
back into the deficit ditch. Congress then added to our woes by passing 
an unfunded stimulus package filled with special interest tax breaks, a 
farm bill that unnecessarily benefits the largest and wealthiest 
producers, and just last week, following the action of the House of 
Representatives, the Senate passed a supplemental spending bill, also 
unfunded, and also apparently filled with special interest provisions 
of questionable value. Each of these actions will only further 
aggravate our budget problems.
  Now, proponents of estate tax repeal are asking us to enact 
legislation that will add even more fuel to the deficit fires. Rather 
than offering a fiscally responsible measure, with provisions that 
offset the cost of repeal, the proponents are content to add to our 
budget deficits, and our already massive federal debt.
  In effect, the proponents suggest that we should repeal the tax on 
the wealthiest estates, and let the Social Security trust funds pick up 
the tab.
  I regret that this is also the case with some of the alternative 
proposals as well--proposals much closer to the kind of estate tax 
reform I support. The choices being presented to the Senate are not 
acceptable. As much as I would like to see a permanent solution to this 
question, I do not support raiding Social Security to achieve it.
  When I was first elected in 1992, we faced an annual budget deficit 
of $340 billion, and projected deficits of roughly the same size for 
many years to come. Thanks to the fiscal restraint we demonstrated in 
the 1990s, and especially to the deficit reduction package we enacted 
in 1993, we saw a virtuous cycle of lower budget deficits and increased 
economic growth. The result was that we eliminated the budget deficits 
and actually began paying down some of the federal debt that was racked 
up during the 1980s.
  We need to return to the fiscal restraint that worked so well during 
the 1990s. And first and foremost, that means paying our bills. The 
estate tax repeal is not funded. It digs our deep budget hole even 
deeper, and we should reject it.
  Mrs. BOXER. Mr. President, the estate tax needs to be reformed, but 
it should not be repealed. Repealing the estate tax would benefit only 
the extremely wealthy at an exorbitant cost to the American people. We 
can help small businesses and family farmers by reforming the estate 
tax. That is the choice before us.
  Let's start with a few facts. Ninety-eight of every 100 people who 
die face no estate tax whatsoever. Only the richest 2 percent of 
Americans do. Estates worth in excess of $5 million paid about 51 
percent of the estate tax in 1998. This tax does not oppress the 
children of multi-millionaires, they still inherit millions. But it 
does provide us with funds for investment in the public good. It is 
completely appropriate that the wealthiest estates contribute some 
portion in taxes to help create opportunities for others to reach their 
full potential.
  Repealing the estate tax would make the rich richer at a heavy cost 
to the rest of us. Between 2013 through 2022, permanent repeal of the 
estate tax would cost us $740 billion. That is $740 billion we could 
use for homeland defense, investments in education and infrastructure, 
and to provide the funds to save Social Security and Medicare.
  It is true that a few small businesses and family farms are subject 
to the estate tax. But of the 2.3 million people who died in 1998, just 
1,418 of those had more than half of their estates in a family-owned 
business or farm. We can and should exempt many of these families from 
the estate tax through responsible reform.
  Furthermore, while the estate tax affects a relatively small number 
of wealthy Americans, it can have a detrimental effect on small 
businesses and families who live in areas that have high property 
values, such as Silicon Valley. Under current law, the first $675,000 
of one's estate is exempted from Federal tax. In some parts of 
California, however, where median home prices exceed $500,000, 
moderate-income individuals must content with taxes paid only by the 
wealthiest residents in other regions.
  I strongly support helping these families by reforming instead of 
repealing the estate tax. The reform I supported and that Senator 
Dorgan introduced would make estates of up of $4 million--and $8 
million for couples--exempt from the estate tax. And it would 
permanently repeal the estate tax for family-owned farms and 
businesses. That is real reform that benefits those who need the help, 
not another giveaway to the richest among us.
  Instead of focusing our efforts on making the very wealthy wealthier, 
we should be working on helping hard-working Americans and investing in 
meeting their needs.
  Mr. KENNEDY. Mr. President, in January 2001, the Congressional Budget 
Office projected an on-budget surplus of $3 trillion over the decade. 
One year later, the projection is for a $242 billion on-budget deficit. 
The largest single reason for that stunning change is not the cost of 
the war on terrorism nor the recession, it is the $1.7 trillion cost of 
the President's tax cut. The administration's proposed budget this year 
would make the existing crisis far

[[Page S5427]]

worse, dramatically expanding the deficit to nearly $1.5 trillion. The 
Social Security trust fund would be used to cover an on-budget 
shortfall every year through fiscal year 2012.
  Just yesterday, at the urging of the administration, we voted to 
raise the debt limit by $450 billion. That increase will only carry us 
until next spring. The Treasury Department has already said that we 
will have to raise the ceiling on government borrowing again early next 
year. Despite the overwhelming evidence, it seems that some of our 
colleagues across the aisle remain oblivious to the connection between 
the larger and larger tax cuts they espouse and the growing deficits 
that inevitably result.
  Why, in this time of budgetary crisis--when the war on terrorism is 
making making new demands on our resources, and when the enormous cost 
of the retirement of the baby boom generation is looming just over the 
horizon--should we be considering another large tax cut for the 
wealthiest taxpayers? There is no good answer.
  Permanent repeal of the estate tax is unaffordable. In the first 
year, full repeal will cost $56 billion. Over the decade beginning in 
2012, the estimated revenue loss to the Treasury is $740 billion.
  Permanent repeal of the estate tax is unfair. While it benefits only 
the wealthiest 2 percent of taxpayers, each year it will consume 
billions of dollars which are needed to finance Social Security and 
Medicare benefits for millions of retirees.
  Permanent repeal of the estate tax is unnecessary. Currently, all 
estates under $1 million are exempt from the estate tax. That exemption 
will rise to $3.5 million under existing law. At that point, only the 
largest one-half of 1 percent of estates will be subject to the tax. 
Making that higher exemption level permanent will protect the vast 
majority of the family farms and family owned small businesses. Their 
estate tax will be zero.
  Permanently repealing the estate tax, as our Republican colleagues 
proposed, would be the triumph of reckless ideology over fiscal 
prudence. It would jeopardize our ability to meet the Nation's most 
fundamental responsibilities in future years.
  In the Bush administration's budget, in a section titled ``The Threat 
to the Budget from the Impending Demographic Transition,'' it states: 
``In the years that follow [2008], the population over the age 62 will 
skyrocket, putting serious strains on the budget because of increased 
expenditures for Social Security and for the Government's health 
programs which serve the elderly--Medicare and increasingly Medicaid.''
  The resources which will be lost to the Treasury by repeal of the 
estate tax are essential to financially strengthening Social Security 
and Medicare. Dedicating the revenue from the estate tax to the Social 
Security and Medicare trust funds would go a long way to securing those 
programs fro future generations of senior citizens. Over the next 75 
years, revenue generated by the current estate tax would be equivalent 
to nearly 40 percent of the shortfall in the Social Security Trust 
Fund. Those dollars should go where they are needed most--to preserve 
the promise of Social Security for future generations of retirees.
  While the advocates of permanent estate tax repeal are reluctant to 
admit it, this vote is really about the financial future of Social 
Security and Medicare. Repeal would be a windfall for the wealthiest 
few at the expense of our ability to keep Social Security and Medicare 
strong for all seniors. Do we choose to commit hundreds of billions of 
dollars to cover the cost of estate tax repeal or to maintain Social 
Security and Medicare for future retirees?
  In the year 2000, nearly 40 million Americans received Social 
Security retirement benefits. With the retirement of the baby boomers, 
that number will steadily grow. By 2010, it will exceed 50 million. In 
comparison, fewer than fifty thousand of the largest estates paid any 
estate tax in 2000. That was just 2 percent of decedents. With the 
increase of the estate tax exemption to $3.5 million by 2009, the 
number of estates paying tax will be further reduced to about 10,000 a 
year. Just one-half of 1 percent of estates will be subject to the 
estate tax.

  Which group needs our help more--the 50 million men and women 
counting on Social Security or the heirs of the 10,000 wealthy 
decedents with multi-million dollar estates? I believe the answer to 
that question should be clear to all.
  Those who most passionately decry the ``unfairness'' of taxing multi-
million dollar estates are strangely silent about the unfairness of 
jeopardizing the retirement benefits of low-wage workers or the 
unfairness of forcing elderly widows to choose between food and 
medicine. Which of these injustices should move the Senate to action?
  Many bogus claims have been made to distract attention from the real 
fairness issue. Those advocating permanent repeal claim it is ``double 
taxation.'' In fact, a major portion of the assets in these multi-
million dollar estates are unrealized capital gains which are never 
taxed. Those favoring repeal assert the Federal Government takes more 
than half of all the assets in these estates. This too is incorrect. 
The Congressional Research Service analyzed the Federal estate tax 
burden on estates that were subject to taxation in 1999 and determined 
that the effective rate was just 12.4 percent. On the largest estates, 
those over $20 million, the effective rate was 17.6 percent. These are 
certainly not unreasonable rates to ask the richest men and women in 
the Nation to pay.
  There appears to be a consensus in the Chamber to permanently exempt 
estates up to $3.5 million from taxation. That feature is common to all 
the proposals. I support it. So, in essence the debate is whether the 
Federal Government should tax estates larger than $3.5 million. Do 
those who have been given the most--the heirs to these fortunes--have a 
special obligation to help the less fortunate members of the American 
community? That is the real fairness question before the Senate today.
  Mr. McCAIN. Mr. President, I rise today to speak on H.R. 8, the Death 
Tax Elimination Act. I want to take this opportunity to explain my 
opposition to making permanent the repeal of the Federal estate tax.
  Last year, the Economic Growth and Tax Relief Reconciliation Act of 
2001 (P.L. 107-16) repealed the Federal estate tax by 2010. It 
accomplished this by gradually raising the ``unified credit'' which is 
the amount of the estate exempt from taxation, from $675,000 in 2001, 
to $1 million in 2002; $1.5 million in 2004; $2 million in 2006; and 
$3.5 million in 2009 and finally repealed the estate tax by 2010. 
However, the estate tax will be reinstated in 2011 as it exists under 
current law. The Death Tax Elimination Act removes the sunset on repeal 
and makes the repeal of the estate tax permanent from 2010 onwards with 
no cap whatsoever.
  I am concerned that repeal of the estate tax would provide massive 
benefits solely to the wealthiest and highest income taxpayers in the 
country. A Treasury Department study found that almost no estate tax 
has been paid by lower and middle-income taxpayers. But taxes have been 
paid on the estates of people who were in the highest 20 percent of the 
income distribution at the time of their death. It found that 91 
percent of all estate taxes are paid by the estates of people whose 
annual income exceeded $190,000 around the time of their death.
  During this time of increasing deficits, we should also be mindful of 
the very high cost of providing those benefits and our ability to pay 
for them. The Joint Committee on Taxation estimates that removing the 
2010 sunset and making permanent the repeal of the estate tax would 
cost $99 billion between 2003 and 2012. But more than half of this cost 
or $56 billion would occur just in 2012. The long-term costs of 
permanent repeal are much larger. In the decade after 2012, permanent 
repeal would result in a revenue loss of $740 billion assuming that the 
cost which the Joint Tax Committee estimates for 2012 will remain the 
same after 2012, when measured as a share of the economy.
  Another concern I have is that repeal of the estate tax will cause a 
significant decline in charitable giving. I fear that eliminating the 
estate and gift tax would remove an enormous tax incentive for the 
wealthy to make charitable gifts. The research on the effect of the 
estate tax on charitable giving has consistently shown that levying 
estate taxes increases the amount of charitable bequests. A recent 
study found

[[Page S5428]]

that eliminating the estate tax would reduce charitable bequests by 
about 12 percent overall.
  Taking these issues into account, instead of repeal of the estate 
tax, I support increasing the ``unified credit'' to allow up to $5 
million worth of assets to be exempt from taxation. I believe this cap 
is a reasonable amount. For example, according to data from the IRS, 
more than 93 percent of taxable estates in 1999 were valued at less 
than $5 million. Farm and family-owned business assets accounted for 
less than three percent of the total value of these estates in 1999. In 
most estates that are taxable and include a business or farm, the 
business or farm does not even constitute the majority of the estate. 
In fact, the American Farm Bureau Federation has acknowledged that it 
could not cite a single example of a farm having to be sold to pay 
estate taxes. These facts belie the argument that we must repeal the 
estate tax to save family businesses and farms to assure that they do 
not have to be liquidated to pay estate taxes.
  Responsible estate tax reform, instead of outright repeal, would 
ensure that small and family-owned businesses and family farms will not 
be taxed out of business in the event of the death of an owner or when 
passed along to the owner's children. Responsible reform would 
alleviate individuals and businesses from being forced to spend time 
and money on estate planning.
  Even some of the Nation's wealthiest taxpayers such as Warren Buffet, 
Chairman of Berkshire Hathaway, and Bill Gates, Sr., father of the 
billionaire Microsoft founder, have gone on record as opposing the 
effort to repeal the estate tax. And in calling for the inheritance tax 
in his 1906 State of the Union Address, President Theodore Roosevelt 
said, ``The man of great wealth owes a peculiar obligation to the 
State, because he derives special advantages from the mere existence of 
government.''
  We have no idea what our financial or economic situation will be ten 
years from now. We may be at war. We may be in the process of putting 
Social Security on a sound financial footing. We may want to have the 
flexibility to provide significant tax relief for lower and middle-
income taxpayers. Other unforeseen issues may arise. The point is that 
we must think beyond the horizon. Making the repeal of the estate tax 
permanent fails to take these new circumstances into account.
  We will need resources to deal with national security, general 
government funding, the coming baby boom retirement and the rising 
costs of Social Security and Medicare, and responsible tax reform that 
benefit lower- and middle-income taxpayers. But we must fund these 
priorities within our constrained budget situation. Reforming the 
estate tax rather than committing ourselves to full repeal is the more 
sustainable and responsible approach.
  Mrs. FEINSTEIN. Mr. President, I rise to address the Gramm/Kyl 
amendment to H.R. 8, the estate tax repeal bill.
  I want to first say that I am philosophically opposed to the estate 
tax, and have long expressed my belief that it is an unfair tax that we 
should ultimately do away with.
  In addition to threatening owners of small businesses and family 
farms, the estate tax acts to stifle investment in businesses, and is a 
disincentive for those who want to save so that they can pass assets on 
to their children and grandchildren. However, to vote in favor of 
repeal today, under our current circumstances, runs counter to another 
of my deep philosophical beliefs: fiscal responsibility.
  Last year I voted to support the President's tax cut package, which 
provides $1.3 trillion in tax cuts over the next decade. My support for 
that bill was partially determined by the estate tax relief provisions 
included within it. When I voted in favor of that bill, we were 
projected to benefit from some $5.6 trillion in budget surpluses over 
the coming decade, enabling us to provide significant relief to 
American taxpayers while also protecting the Social Security trust fund 
and programs in health, education, and numerous other areas.
  Needless to say, that outlook has changed dramatically in the past 
twelve months. The economic slowdown, combined with major new expenses 
associated with providing for homeland security and fighting the war on 
terror, have put a major strain on the federal budget, requiring 
Congress to exercise a degree of fiscal responsibility not seen during 
the late 1990's.
  Despite the threat of a budget deficit of over $125 billion this 
year, and projected deficits stretching through the end of the decade, 
House Republicans have made clear their intent to push through a 
permanent extension of all of the tax cuts included in the President's 
bill last year. The first of those extensions, and the one that we are 
considering today, is a permanent repeal of the estate tax.
  Yet there could not be a worse time to consider full repeal of the 
estate tax than right now. The latest estimates project full repeal of 
the estate tax will cost the federal government over $740 billion 
between 2011 and 2020. Although it is my hope that we will be able to 
permanently extend the repeal at an appropriate time before it is set 
to expire in 2010, we are in no position today to do that and cope with 
major outlays for defense and homeland security, as well as threats to 
funding for Social Security and Medicare.
  Earlier today, I voted in support of Senator Dorgan's amendment as a 
good compromise on this issue, and because it goes a long way toward 
addressing one of my major concern with estate tax: that it puts 
family-owned businesses and farms at risk of sale or closure simply 
because heirs are forced to sell in order to pay the estate tax bill.
  In addition to permanently extending an increased unified credit of 
$4 million per individual and $8 million per couple, Senator Dorgan's 
amendment provides relief to small business and family farm owners who 
suffer the most under current law by providing an unlimited exemption 
from the federal estate tax to small business owners and farmers. This 
would ensure that this tax no longer threatens anyone wishing to pass 
on a family-owned business to his or her heirs.
  Under current law, the unified credit is set to increase to $3.5 
million by 2009, but the Qualified Family Owned Business Interest 
exemption will expire in 2004, removing what few safeguards are in 
place to protect those whose assets are tied up in family-owned farms 
or businesses.
  I am particularly concerned about protecting these businesses because 
of the relatively high value of California farm land. The value of an 
orange grove in Ventura, CA may be as high as $15,000 per acre due to 
local development pressures, compared with a price of $1,500-2,000 per 
acre for corn-growing land in a mid-western state.
  As a result, even a medium-sized California farm of 400 to 500 acres 
may be liable for a hefty estate tax bill, especially when the value of 
farm buildings and other capital investments are factored in.
  The estate tax may make it impossible for a family farm to be passed 
down from generation to generation. No one should be forced to sell the 
family farm just to pay the estate tax.
  Small business owners are equally at risk, and those who own and 
operate capital-intensive businesses must bear an exceptional burden. 
While the issue of small business liability under the estate tax has 
often been represented as affecting a tiny minority of Americans, in 
fact there may be many small business owners who sell or transfer their 
businesses in expectation of their heirs having to pay the tax.
  Additionally, the sale of family-owned businesses, particularly to 
larger conglomerates, threatens the jobs of thousands of Americans who 
are employed by those businesses. Even those businesses that can cover 
their tax liability may have to take on a large debt burden that 
threatens their competitiveness and delays efforts to expand or grow 
the business.
  The Dorgan amendment would have resolved this problem by uncapping 
the Qualified Family Owned Business Interest exemption entirely, but it 
also would have raised the individual exemption to $4 million in 2010. 
By providing this much-needed relief, the amendment would have limited 
estate tax liability to a tiny fraction of wealthy Americans who have 
large holdings of marketable assets.
  Regrettably, the Dorgan amendment did not pass, and we are faced with 
an unfortunate choice between full repeal

[[Page S5429]]

and the limited relief passed as a part of the President tax package 
last year.
  I very much look forward to a time when the Senate can vote for full 
repeal of the estate tax with a clear conscience, knowing that a vote 
to repeal the estate tax is not a vote against fiscal responsibility. 
To vote for full repeal today would be to turn a blind eye to such 
responsibility, and to move forward guided only by the kind of 
irrational optimism that was so readily propounded only a year or two 
ago.
  Mr. DASCHLE. One year ago, America had a projected budget surplus of 
2.7 trillion dollars over the next 10 years.
  The stock market was soaring.
  The question before us was one that most leaders could only dream of: 
``What should we do with our prosperity?''
  At that time, the debate was focused on tax cuts, how much, for whom, 
and could we also provide for America's unmet needs?
  Nine months ago yesterday, more than 3,000 innocent men and women 
lost their lives to terrorism.
  In the months since, an anthrax attack and recent disclosures have 
revealed holes in our homeland security. The collapse of Enron has 
raised questions about our system of corporate governance and we are 
soon to begin perhaps the most dramatic restructuring of government in 
half a century.
  All of this has occurred against the backdrop of massive demographic 
changes that will transform the face of our nation for decades to come.
  In 2008, the first of the Baby Boomers will begin retiring. By 2015, 
50 million seniors will be drawing benefits from Social Security. 
Prescription drugs are becoming a more and more vital part of American 
health care, and we need to find a way for Medicare to help pay for 
them.
  At the same time we're facing a senior boom, we're also facing a 
youth boom. School enrollments are already at record levels, and will 
continue to rise every year for the next 8 years.
  So here is where we are: The surplus is gone.
  The Treasury is borrowing money and spending Social Security funds to 
pay for the daily functions of government.
  We have just passed a bill to allow America to take on even greater 
debt. The baby boomers are preparing to retire.
  More children than ever are moving through our schools.
  Investors have had their confidence in American business shaken.
  We are in the midst of confronting new--and previously unimaginable 
threats to our nation.
  We are at war.
  The question facing America is no longer, ``What should we do with 
our prosperity?'' The question now is: ``How do we protect our 
citizens, strengthen an ailing economy, prepare for the future, and win 
this war against terrorism?''
  I believe history will judge this Congress by how well we answer that 
question.
  And I believe every action we take should keep those four key goals 
in mind.
  Today, we are debating, once again, what seems to be the Republican 
Party's only solution to all of these problems--more tax cuts.
  Specifically, we are debating a permanent repeal of the estate tax, 
an idea that could not be more at odds with the priorities of the 
nation at this critical time.
  It is bad public policy. It is unfair. It will undermine Social 
Security, depress American philanthropy, hurt state budgets, and make 
it more difficult to meet every other challenge we face.
  And I want to be especially clear that there is a vast difference 
between fairly protecting family farms and small businesses on one 
hand, and blindly destroying our fiscal balance on the other.
  Repealing the estate tax will cost $99 billion over the next decade, 
and $740 billion in the decade after that.
  Most of that will come from the Social Security trust fund. If you 
look out over the next 75 years, the cost of repealing the estate tax 
will account for nearly 40 percent of the entire shortfall in the 
Social Security Trust Fund.
  And who benefits? The wealthiest two percent of American estates. By 
2009, it will be the wealthiest one half of one percent of all estates.
  What we're talking about is diverting the Social Security 
contributions of millions of American workers to fund a massive tax cut 
for the most fortunate of the fortunate few.
  And sometimes it's the fraudulent few.
  Yesterday, Senator Conrad had a chart here on the floor showing 
Jeffrey Skilling, a former CEO of Enron, stands to gain $55 million 
from the repeal of the estate tax. That $55 million will be composed of 
the Social Security contributions of 30,000 working Americans earning 
$30,000 a year.
  We've been hearing a number of arguments in favor of estate tax 
repeal from our Republican colleagues, so let me just take a minute and 
address a couple of the issues they raise.
  They argue that the estate tax forces the sale of family farms and 
businesses. Some agriculture organizations have said that it is 
important to repeal the estate tax, but when asked if they could cite 
when asked if they could cite a single example of a farm lost because 
of estate taxes, they couldn't name one, not one.
  As Neil Harl, an Iowa State University economist who has studied the 
issue extensively, said simply, ``It's a myth.''
  And here's why: in Iowa, the average farm is worth $1.2 million. In 
South Dakota it's just over $500,000. Family farms simply do not fall 
victim to the estate tax.
  The same goes for family businesses. In the few cases where family 
businesses are subject to the estate tax, it is usually because that 
business is just one part of a larger estate.
  But just to make sure that family farms and small businesses aren't 
hurt, we're proposing an alternative that will exempt virtually every 
family farm and small business from the estate tax.
  Family farms and small businesses define us as a nation. We've never 
seen it demonstrated that they are being broken up by the estate tax, 
but, just in case, we're going to see to it that they never will be.
  Others have argued that the estate tax is un-American, that it is a 
penalty for success. The history of the estate tax shows the exact 
opposite is true.
  Not only does the estate tax encourage economic success based on 
merit rather than birthright--it is a demonstration that those who have 
done well by this nation have a special obligation to contribute to its 
continued success--and its defense.
  In his 1906 State of the Union, President Theodore Roosevelt, a 
Republican, proposed the estate tax to help finance the war debts of 
the 19th century, saying, ``The man of great wealth owes a peculiar 
obligation to the State, because he derives special advantages from the 
mere existence of government.''
  To single out the estate tax for elimination in the midst of this 
current war goes against the intent, and the history, of this policy.
  Those arguments may be false. But there are some powerful and 
disturbing truths about making the estate tax repeal permanent.
  In the short term, it costs $99 billion.
  Just yesterday, we passed an increase in the debt limit in part so we 
could meet the new security demands we're facing in an increasingly 
uncertain and threatening world.
  If giving a handful of multi-millionaires and billionaires another 
tax break requires a choice between more debt and less security--that 
should be a clear signal that the price is simply too high.
  In the longer term, we will feel the full brunt of this repeal at 
exactly the time the baby boomers begin to retire. We know that, 10 
years from now, we are going to need some fiscal flexibility to start 
paying the retirement benefits to the biggest retirement population 
that's ever passed through the system, and yet some want to succumb to 
fiscal irresponsibility at precisely the time we can least afford it.
  We have all heard the old saying, ``When you find yourself in a hole, 
stop digging.''
  Well, it is time for us to stop digging a deeper hole, and start 
getting serious about the problems we face.
  Last March, a farmer named John Sumpton, from Frederick, SD, came to 
testify before the Senate Finance Committee.

[[Page S5430]]

  ``Mr Chairman,'' he said, ``I am not an expert on tax law, but I know 
about family farmers. They are my friends and neighbors. They are not 
worried about estate taxes, because, for the most part, they don't have 
to pay them. They are worried, however, about the prices they receive 
for their crops and livestock, about good public schools for their 
kids, about local community services, paying for prescription drugs, 
and being able to pay their bills in retirement. And, of course, they 
are always worried about the weather.''
  He continued: ``I fear we may not be able to do the things we want 
and need for our communities if we repeal the federal estate tax. To 
me, it doesn't seem responsible to eliminate the estate tax for 
everyone, including billionaires, when they don't need the help. A more 
targeted approach that helps families better address this issue now, 
while retaining more resources for other needed public investments to 
improve our future, seems a more practical and appropriate course of 
action.''
  John Sumpton is right.
  And I hope the Senate will heed his sensible advice.
  Mr. CONRAD. Mr. President, I yield 2 minutes to the Senator from 
Delaware.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. CARPER. Mr. President, I thank my colleague for yielding me this 
time.
  As did a number of my colleagues in the Senate, I served as the 
Governor of my State before I was privileged to come to the Senate. As 
a Governor of my State, I was a supporter of tax cuts. We cut taxes for 
7 years in a row. In fact, we eliminated the gift and inheritance tax 
altogether. While we cut taxes 7 years in a row, we also balanced the 
budget 8 years in a row. We also were able to slow the growth of debt 
in our State. We earned ourselves a AAA credit rating for the first 
time in Delaware history.
  Others have spoken to the equity and the fairness of eliminating 
altogether the estate tax. I will leave those arguments to those who 
have already spoken. I simply want us to keep this in mind. There is an 
old theory called a theory of holes. It goes something like this: When 
you find yourself in a hole, stop digging.
  To have voted yesterday to raise the debt ceiling by another $450 
billion and then to turn around and cut taxes in a way that will only 
increase our indebtedness is a matter of concern to me and ought to be 
to all. Our Republican friends are right: We cannot simply be opposed 
to cutting taxes in ways that perhaps are unfair in this case and turn 
around and simply vote to increase spending.
  I had a good long conversation with one of our Republican colleagues 
on the phone last night about this body and about our propensity to 
spend ever more money for defense, for homeland defense, more money for 
social programs, good social programs, and at the same time, voting to 
cut taxes. It does not add up. I do not know how to stop it.
  I want to put down a marker today and say it is something that is not 
a sustainable policy, and one I hope we will not continue.
  Mr. CONRAD. I yield 3 minutes to the Senator from New Jersey.
  The PRESIDING OFFICER (Mr. WELLSTONE). The Senator from New Jersey.
  Mr. CORZINE. Mr. President, I rise to speak strongly in opposition to 
the Gramm amendment. I am in the group of folks who believe we need 
reform, not repeal. There are some positive things we should do with 
respect to the estate tax. However, I find it terribly difficult 
knowing the meritocracy of America that I think provides opportunity to 
all, that we are voting to create something that is against the 
principles and buildup of aristocracy, contrary to at least the America 
I understand.
  I believe that is why we have seen many people who have benefited so 
much from our society because they have been able to live in a free 
America where they had access and equal opportunity and a public 
educational system, infrastructure that worked positively for folks, 
that they feel very strongly there is a responsibility to give back by 
those who have been blessed with their lives.
  Quite frankly, it is one of the things that helped in my own life. I 
think about the schoolteachers in the rural community in which I grew 
up who gave me the access to the American promise. I believe America is 
about meritocracy, not aristocracy. It is about community, and 
community-wide interests--not just the interest of the few.
  We have heard the statistics about how narrow a slice of America 
benefits from this action. This is a period of sacrifice in America, 
when we are asking men and women to go overseas to protect us. We are 
asking others to sacrifice on our investments in education and our 
protections in the environment and all kinds of things that make sense 
in a choice situation, to go in a direction where the few are benefited 
to the exclusion of the many. This is very difficult.
  I would be remiss if I did not bring it up in the context of 
something about which I deeply care; that is, protecting the integrity 
of our Social Security and Medicare systems. People will say there are 
other choices on spending. But we have a very clear choice where we 
provide for those who benefited the most from the American system to be 
able to use our Social Security funds and Medicare funds that we raise 
and directly expend it on something that, in a period of sacrifice, is 
hard to understand--why our priorities and why our choices are here.
  This is a moral issue about priorities in this Nation, making sure we 
are funding special education.
  The PRESIDING OFFICER. The Senator's time has expired. The Senator 
from Nevada.
  Mr. REID. Mr. President, I ask unanimous consent the time for debate 
on this matter be extended 10 minutes equally divided.
  The PRESIDING OFFICER (Mr. Corzine). Without objection, it is so 
ordered.
  Mr. CONRAD. Mr. President, I close debate on our side by pointing out 
that we are not making these decisions in a vacuum. We have to consider 
the fiscal condition of the country when we make any spending decision 
or any additional tax cuts.
  The fact is, last year we were told we had trillions of dollars of 
surplus over the next 10 years. Now we see those surpluses are gone. 
They have evaporated. Instead, we are going to be running massive 
deficits--this year, a $320 billion deficit.
  The Senator from Oklahoma said it would be unconscionable to keep 
this tax. I think it would be unconscionable to drive this country into 
deeper deficit and deeper debt. That is precisely what the amendment of 
our colleagues on the other side does. It is very clear the cost of 
estate tax repeal explodes in the second decade. Not only does it cost 
$100 billion in this decade, every penny of which is coming out of the 
Social Security trust fund, but in the second 10 years, it costs $740 
billion right at the time the baby boomers start to retire, right at 
the time there will be unprecedented demands on Social Security and 
Medicare and, God forbid, on the needs of the defense of this Nation.
  This is the most irresponsible amendment offered on the floor of the 
Senate this year. It would gut the fiscal condition of this country 
when we know it is already teetering.
  Instead of repeal, we ought to reform this tax. Yes, the estate tax 
bites at too low a level. So I recommend in my amendment we give an 
exemption of $3 million for an individual, $6 million for a couple, 
beginning next year. For 2009 and thereafter, the exemption increases 
to $3.5 million for an individual, $7 million for a couple. This saves 
hundreds of billions in the second decade and saves huge amounts of 
money in this decade, as well. By 2009, only .3 of 1 percent of estates 
face any estate tax liability under my amendment.
  In this decade, there is a big difference between these two 
approaches, the cost of the Republican proposal is $99.4 billion; the 
cost of my proposal is $12.6 billion.
  Under my proposal only .3 percent of estates in this country are 
subject to tax. Not only is it a question of affordability, it is also 
a question of fairness. Again, my colleague from Oklahoma says it is 
unconscionable to ask the wealthiest among us to contribute to the 
fiscal health of the Nation. I don't think it is unreasonable.
  President Theodore Roosevelt, one of the greatest Republican 
Presidents, did

[[Page S5431]]

not think it was unreasonable. President Abraham Lincoln, one of the 
greatest Republican Presidents did not think it was unreasonable. I 
think it is unreasonable to say to the American people that we ought to 
give Mr. Skilling, who ran Enron, a $55 million tax cut and finance it 
by asking 33,000 Americans, earning $30,000 a year, to put all of their 
Social Security taxes into the pot so we can give Mr. Skilling a $55 
million tax cut.
  I do not think that is fair. Not only do I not think it is fair, the 
American people do not think it is fair. In a poll released today by 
the Fair Estate Tax Coalition, they showed that 58 percent of the 
American people favor reform over repeal. Mr. President, 37 percent 
favor repeal, 58 percent favor reform.

  It is very interesting; in this poll what they found, under Federal 
budget priorities, is the people of this country overwhelmingly say 
strengthening Medicare and Social Security is No. 1, 38 percent; 
increasing spending for education, 33 percent; giving seniors a 
prescription drug benefit, 29 percent; increasing funding for 
children's health, 18 percent; retiring the national debt, 16 percent; 
cutting taxes, 16 percent.
  What tax cuts do they favor? And that is only 16 percent of the 
American people who say that is their priority; eliminating the estate 
tax is the bottom of the barrel. They prefer cutting taxes for 
moderate- to low-income Americans, eliminating the marriage penalty, a 
capital gains tax cut; dead last is eliminating the estate tax.
  This is a fundamental question. Presidents Abraham Lincoln, Theodore 
Roosevelt, Woodrow Wilson, and Franklin Roosevelt supported inheritance 
taxes because without them this country would move further from 
democracy and closer to aristocracy.
  This is a fundamental misunderstanding of the heritage of America. 
Meritocracy, not aristocracy; reform yes, repeal no.
  The PRESIDING OFFICER. The time of the Senator has expired.
  The Senator from Texas.
  Mr. GRAMM. How much time do we have, Mr. President?
  The PRESIDING OFFICER. Twenty minutes, twenty-five seconds.
  Mr. GRAMM. Why don't I take 10 minutes, and I will give my colleagues 
10 minutes.
  Let me just begin by sort of straightening a little history out. The 
death tax started in America through a Stamp Act on wills when we had 
an undeclared war with France. It was repealed right after the tensions 
with France ended but was reimposed during the Civil War. Abraham 
Lincoln did not impose a death tax because he wanted to take away 
people's inheritance in America. He imposed it, along with a lot of 
other taxes before we had an income tax, to try to save the Union. It 
too was repealed when the war was over.
  We reimposed the death tax during the Spanish-American War, and 
repealed it when the war was over. Finally, it was imposed during World 
War I. We had a battle between the President and the Congress over the 
League Of Nations. It ended up not being repealed, and it still plagues 
us today. That is the history of the death tax.
  Let me also say to my colleagues that this is an old issue and it is 
an old issue between the two great political parties. In 1981, when 
Ronald Reagan came to Washington, part of his tax cut was to raise the 
exemption--the amount of wealth in your business or your farm or your 
estate you could protect from taxes--from $175,000 to $600,000. The 
same arguments made by the same Democrats were made at that time. They 
said it was wrong to raise the exemption to $600,000. Had they 
prevailed 20 years ago, the exemption would be $175,000 today.

  Ten years ago, Congressman Gephardt and Congressman Waxman proposed 
lowering the exemption--that is, the amount of your farm or your 
business or your estate that you could pass to your children without it 
being taxed--from $600,000 to $200,000.
  Our colleagues basically admit this is a cancer on the economy--but 
they only want to take part of it out, not all of it out. The problem 
is, 10 years ago members of their party were trying to lower the 
deductible and raise the tax. We want to take the whole cancer out 
because we believe it will come back if we do not.
  Finally, in 1997--which is not that long ago--32 Democrat Members of 
the Senate voted against raising the exemption to $1 million.
  We have had a lot of talk today about rich folks and who is rich and 
who is not rich. Sometimes it is awfully hard to tell. But I do want to 
use this figure. Iowa is a farm State. They have 80,000 farms. It is 
estimated that 30,000 of those farms today are valuable enough that if 
the owner of the farm died, their children would have to pay a death 
tax. That is almost 40 percent of the farms in Iowa.
  Look, there are some people who are bothered by the fact that some 
people become successful in America and make money. I am not one of 
them. If someone became very rich, started a business in College 
Station, had 200 employees, had $10 million worth of machines and plant 
and equipment and trucks, and they died--our Democrat colleagues say 
they are rich. But is America richer if we take $5.5 million from them, 
make them sell the business, sell the trucks, sell the equipment, make 
their children do all that to give the Government $5.5 million in 
taxes? Are we not better off leaving that $5.5 million at work in 
College Station than we are destroying that business and bringing it to 
Washington?
  Sure, the family is rich. But is America richer or poorer by 
destroying it? Can we build up one family by tearing down another? I do 
not think so.
  I mentioned earlier in the debate--I want to mention it again--I have 
been bequeathed only one thing in my life. My Great Uncle Bill, my 
grandmother's brother, died and left me in his will a cardboard 
suitcase. I am proud to say I still have it today. It had yellow sports 
clippings from the 1950s in it. If they had been baseball cards, I 
would be a rich man today.
  If all my relatives I know of left me everything they own, I do not 
believe I would qualify to pay the estate tax.
  So why do I feel so strongly about repealing the death tax? For the 
simplest of all reasons--it is wrong. It is wrong. It is not right, no 
matter whether somebody is Bill Gates or Dicky Flatt, who owns a print 
shop in Mexia, TX, and who never gets that blue ink off the end of his 
fingers. It is wrong, when they die, to make their children sell off 
their life's work to give Government 55 cents out of every dollar they 
have accumulated in their lives. They work, they save, they scrimp--
Dicky Flatt gets up early in the morning, he works on Saturday. 
Everything he owns he plows back into that business. He sent his 
children to Texas A&M. They have come back into the business.
  Dicky's daddy worked there, his momma worked there, he works there, 
his wife works there, his son works there, his son's daughter worked 
there, and they plow everything they can back into their business. I do 
not know what it is worth. But I know whom it belongs to. I know who 
built it.
  How is it right, after they have done all that work, made all those 
sacrifices, scrimped and saved, lived far below the level they could 
live if they chose to spend their money--why is it right to take it 
away from them just because they earned it? That is what this issue is 
about. It is not about being rich versus being poor. It is about right 
versus wrong. It is wrong when people who pay taxes on every dollar 
they earn, who have plowed it back into their businesses or farms or 
estates, to destroy all that when they die.
  Death should not be a taxable event. It is hard enough to face dying, 
without having to know that your children are going to lose what you 
have built.
  Every day, people are spending billions of dollars to try to get 
around this tax. Talented people are retiring when they are 55 years 
old because they know the Government is going to take the fruits of 
their labor away from their children. People are selling off farms to 
try to plan their estates. They are shutting down businesses to divide 
up the assets ahead of time so they do not have to pay the taxes, and 
America is poorer for it.
  We have heard a bunch of speeches from my colleagues. They believe 
what they believe. I believe what I believe. Who is to say who is 
right?
  But I will say this. Over and over, we have heard people get up on 
the floor and say we can't afford this. I would just like to remind my 
colleagues that last Thursday--I hope I am not stretching their 
memory--last Thursday we

[[Page S5432]]

spent $14 billion the President did not ask for, for nonemergency 
matters. That is four times as much, over the next 2 years, as 
repealing the death tax permanently would cost. So the same people who 
say we cannot afford to make the repeal of the death tax permanent, 
they could afford to spend four times that much last Thursday on 
unrequested programs, but they cannot afford it today.
  When we passed the farm bill, they could afford to spend seven times 
as much as it would cost next year to repeal the death tax, but they 
can't afford it today.
  On the energy bill, they could spend more than enough to pay for it, 
but they can't afford it today.
  When we added all those riders to the trade bill, they could spend 
more than it would cost next year to repeal the death tax, but they 
can't afford it today.
  When they wrote this budget, they asked for $106 billion of new 
discretionary nondefense spending. We have heard all of this talk about 
the war and fighting the war. When they wrote this budget, they spent 
$106 billion more than the President asked for. Yet today they cannot 
afford to make the death tax repeal permanent.
  It is a matter of priorities. It is a matter of what you think is of 
a higher order.
  What my Democrat colleagues, with very few exceptions, have said 
indirectly, without saying it just flat out, is the following: They are 
willing to force people to sell off their businesses and farms to give 
the Government the money because they want to spend it. They think that 
is more important than leaving those businesses and farms intact.
  I believe they are wrong. I believe the American people believe they 
are wrong. I think this is something that we need to do. I commend it 
to my colleagues.
  I yield the remainder of our time to my colleague from Arizona. I 
thank him for his leadership on this issue.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Mr. President, I compliment the Senator from Texas for 
sponsoring this amendment and for making the arguments which I believe 
will result in this body finally voting to making permanent what we 
voted for just a year ago.
  I want to remind my colleagues that 48 Republicans and 12 Democrats--
56 of us in all--voted to repeal the death tax. There were two other 
Republican Senators who were not here but would have voted to do that. 
That is 58 of us. It passed in the House of Representatives. The 
President signed it into law.
  By now we all know, however, that because of the rules under which we 
operate, all of the tax relief we provided sunset at the end of 10 
years.
  It is for that reason only that we have to come back and revisit this 
today. The good news is we have a chance today to make what we did 
before permanent.
  I submit that unless Senators want to say to their constituents, ``I 
was just kidding when I voted to repeal the death tax,'' that those who 
voted to repeal it before are going to have to vote to repeal it again, 
and this time to make it permanent, or else we will perpetuate this 
hoax.
  I have heard a lot of talk about meritrocracy and aristocracy. I 
would like to talk about the American dream.
  I prefer to go back a couple of generations when immigrants came to 
this country. They brought the ethic of hard work and savings and 
investment. By the way, investment means job creation. We all know 
that. But they worked very hard because they wanted to be able to give 
their kids and their grandkids a better chance and more opportunity 
than they themselves had.
  That is what this country is all about. That is why people have 
sacrificed a lot--as Senator Gramm said, to be able to leave their kids 
something. That is the American dream.

  When we talk about doing something for the rich, they are not 
listening to the debate. The rich man died. He is not rich anymore. He 
is not even alive anymore. He died. So who pays the death tax? His 
kids, usually. Who are they? Are they rich people?
  I have said this before. Let me say it again. This is from the 
Internal Revenue Service. These are the official statistics of the IRS. 
They answer the question about who actually pays. They break it out by 
men and women. This, by the way, is their latest statistics, Statistics 
of Income Bulletin, Summer of 1999, pages 72-76.
  The largest group are men: 27.7 percent were administrators, upper 
management, and business owners. That you would expect. That is only 27 
percent.
  Who is the next group? The second largest group of men, 12.3 percent, 
were schoolteachers, librarians, and guidance counselors--these filthy 
rich who deserve to be punished. Maybe their dad had accumulated a lot 
of wealth. These are not rich people. But their dad is maybe giving 
them an opportunity to invest some of that money, maybe, to start a 
small business of their own, or to do something more with it to create 
jobs and to help make this American dream come true.
  How about women? As we know, the majority of small businesses in this 
country are owned by women. For females, the IRS statistics say that 
the largest group--14.1 percent--were educators and teachers. These are 
people who are paying the death tax. These are the women who are paying 
the death tax.
  The next largest group--9.6--were in clerical and administrative 
support occupations.
  If you want to analyze all of the occupations, a significant number 
of the estate tax filers were scientists, sales people, entertainers, 
airline pilots, military officers, and mechanics. These are the estate 
tax filers.
  These are the people we want to punish. It is not fair. These people 
deserve to be treated just as fairly as anybody else in this country.
  Again, according to the Internal Revenue Service, in 1999, 116,500 
estate tax returns were filed; 60,700 of those--in other words, more 
than half--were filed by estates with values of less than $1 million. 
For estates valued between $1 million and $5 million, 50,600 were 
filed. That is just about all that is left. Above $5 million, there 
were only 5,200 of those estates.
  Even combined, the millionaires filing do not exceed the 
nonmillionaires filing.
  The vast bulk of these, in other words, are by people who do not have 
these multibillion-dollar kinds of patina, or even multimillion-dollar 
kinds of patina that people would like to create.
  What kind of people are they? What is their money? The Senator from 
New York talked about the salaries of all of these rich entrepreneurs. 
They are paying income taxes on those salaries, I might add. We are 
talking about the estate tax, the death tax--not income tax.
  I talked this morning about Brad Eiffert who with his dad owns the 
Boone County Lumber Company in Columbus, MO. He doesn't make very much 
in salary every year. They do not have any cash to speak of because 
they put all of their money back into the Boone County Lumber Company. 
They go to the bank and borrow money to buy lumber which they sell. 
They buy trucks and forklifts.
  They do the same thing we do. We don't go out and buy a house with 
cash. We go get a mortgage loan from the bank.
  For much of what they own they have borrowed the money. But they make 
enough money to pay themselves a salary to live on--the dad and the 
son--and to hire 30 people whose salaries they pay. That is 30 more 
families that benefit. When the dad dies, Brad is concerned that he 
doesn't have the cash around to pay half of the value of the estate. It 
is not his income that gets taxed. It is the value of the entire 
business; that is, all of the lumber inventory, trucks, forklifts, the 
warehouse, and the whole thing.
  Take that whole value and he says: I don't have that much money to 
pay half of that to Uncle Sam when my dad dies. Where am I going to get 
it? I can't borrow. I am fully leveraged. I have done the financing. I 
will have to sell the business to pay the tax.
  That is what this is all about. That is why it is so unfair.
  Job creation--well, those jobs are gone. I suppose if you sell it to 
somebody else and the idea is to prevent the accumulation of wealth, 
you usually sell it to a large corporation. So instead of a family 
business, you have some large conglomerate that may let

[[Page S5433]]

people go and consolidate, or whatever. So much for the American dream. 
So much for consolidation of wealth.
  How would you say this money ought to be taxed, somehow or other? My 
colleague from Texas already pointed out that income tax has been paid 
on it.
  But I don't think what our colleagues realize is, we don't just 
repeal the estate tax, we substitute another tax for that, the capital 
gains tax, but with a big difference. Most of us agree that death 
should not be a taxable event. You did not have any choice in the 
matter, of the timing of it, how it happened, when it happened, and so 
on. You do have a choice over when you sell something or don't sell it, 
and you know what the tax consequences are.
  So when your dad dies, instead of the kids having to pay a tax on 
half of the value of his estate, and having to sell assets to do it, 
and so on, under our proposal the estate passes to the heirs. They take 
the property. They do not pay the tax on death day. But when they sell 
any of it, they pay a tax. They pay a tax on the capital gains, and it 
is calculated on the basis of dad's purchase price. So that is how you 
pick up the revenue.
  Mr. President, 60 percent of the American people realize this is 
unfair, and three-fourths of them say they favor its repeal, even 
though they would not benefit at all. They understand the unfairness of 
the existing tax.
  We now have an opportunity to make permanent what we passed before, 
which is the repeal of the estate tax, and to substitute for us the 
very fair capital gains tax on the original basis of the property. That 
is what we have the opportunity to do. The House of Representatives has 
passed this measure. If we pass it today, it goes to the President, and 
he can sign it. He has asked us to send it to him so he can sign it, to 
end this unfair tax and replace it with a fair tax.
  I urge my colleagues to vote against the Conrad amendment, to vote 
for the Gramm-Kyl amendment, and to have a fair tax in the United 
States.
  The PRESIDING OFFICER. Time has expired.


                           Amendment No. 3831

  Under the previous order, there are 5 minutes of debate evenly 
divided before a vote with respect to the Conrad amendment.
  The Senator from Texas.
  Mr. GRAMM. Mr. President, I will speak first because I think Senator 
Conrad deserves the right to close out on his amendment.
  I think this issue has been pretty well debated. I agree with the 
Democratic floor leader, Senator Reid; I think it has been a good 
debate.
  The Conrad amendment does not repeal the death tax. It improves 
current law by speeding up the process and making a nominal change in 
it, but it still leaves the structure of the system in place where we 
have a tax on death.
  I believe it is fundamentally wrong, and I am unwilling to get into a 
debate about at what income level it is wrong. I have never accepted 
the thesis that what is right for one American is wrong for another 
American based on their income. Right is right and wrong is wrong where 
I come from.
  I want to repeal the death tax. The Senator from North Dakota does 
not. That is what it all boils down to.
  It has been said over and over, as many ways as you can say it, I 
still remain amazed that people who consistently vote for new spending 
never have money when it comes time to let people keep more of what 
they earn. But rather than reiterate all that, let me sum up and say we 
are going to have an opportunity, after we vote on Senator Conrad's 
amendment, to repeal the death tax. There is only one real repeal, and 
that is the one I have offered with Senator Kyl.
  I urge my colleagues to vote against the Conrad amendment and to vote 
for the Gramm-Kyl amendment.
  I believe we will get over 51 votes. As you know, because a point of 
order will be raised against the amendment, we will have to get 60. I 
don't know that we will get 60 votes today, but I believe we are taking 
a step toward repealing the death tax permanently. And I am confident 
that it will be repealed.
  Mr. KOHL. Mr. President, I rise today to support the Conrad estate 
tax reform amendment and oppose the Gramm-Kyl estate tax repeal 
amendment. I want to compliment equally both sides in this debate, 
however. They have brought before the Senate a clear question about the 
direction of U.S. tax policy--a question that the Senate should 
address. Should the very richest families in this country be able to 
pass their entire fortunes onto the next generation tax free? In a time 
of re-emerging budget deficits, urgent homeland defense needs, and a 
slowly recovering economy, is a tax break exclusively for the very 
richest among us a good idea?
  That is what this debate is about. Unfortunately, we have heard more 
about other issues then that very basic question of how we tax the rich 
and the not so rich in this country.
  We have heard that the votes today are about repealing a tax on those 
who inherit that causes the break-up of family businesses or farms. It 
is not. The Conrad amendment raises the amount of an estate exempt from 
tax to $3.5 million, $7 million for a couple, by 2009. In Wisconsin, 
that will completely exempt all but 0.2 percent of estates from any 
taxes at all. So we are not arguing over estate taxes on the local 
dairy farm or the small business operating on Main Street. We all agree 
they should be totally exempt, and under all proposals we consider 
today, they are.
  No, the question today is should we go further than exempting small 
businesses, medium-sized businesses, and most all farms--certainly all 
Wisconsin farms--from the estate tax? Should we enact a tax break for 
very richest families in this country--less than 1 percent of all 
estates in this country? Or should we save the hundreds of billions of 
dollars that that tax break will cost--and use it to defend our country 
better, pass tax breaks that help the middle class working family, or 
simply pay down our huge debt? I can think of many uses for billions of 
dollars better than passing a tax break that will benefit those that 
inherit $15 million but do nothing for those who inherit $15,000, 
$150,000, or even $1 milllion.
  The choice is clear. It is time to reform the estate tax and exempt 
99 percent of all families from any worry of taxes after death. It is 
not time--and I am not sure it ever will be--to give a multi-billion 
dollar break to a very small number of very rich families.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, we should reform, not repeal, the estate 
tax because repeal is unaffordable, it is unfair, and it is unpopular.
  First, on the question of affordability: The cost of eliminating the 
estate tax absolutely explodes in the second decade. It costs $100 
billion in this 10-year period. It costs $740 billion in the second 
decade, right at the time the baby boomers retire, and when we know we 
already are in deep deficit and adding to the debt.
  Just yesterday we added to the national debt by $450 billion. Our 
friends on the other side of the aisle would dig that hole much deeper.
  My proposal is far more affordable. Instead of $99.4 billion in the 
next 10 years, $12.6 billion.
  The elimination of the tax is unfair.
  One example: Mr. Skilling, the former head of Enron, would get a $55 
million tax cut, paid for by the Social Security taxes of 30,000 
Americans earning $30,000 a year. That is not fair.
  On the question of popularity, overwhelmingly, the American people 
say: Reform, not repeal. By 58 percent to 37 percent, they favor reform 
over repeal.
  That is what my amendment does. It takes the exemption to $3 million 
for an individual and $6 million for a couple next year. In 2009, it 
goes to $3.5 million for an individual and $7 million for a couple. 
They would pay nothing.
  That is fair. It is affordable. And it is what the American people 
want.
  I urge my colleagues to support the Conrad amendment.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. All time is yielded back.
  The Senator from Texas.
  Mr. GRAMM. Mr. President, under the unanimous consent agreement, I 
raise a 311 budget point of order against the Conrad amendment.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, pursuant to section 904 of the 
Congressional Budget Act of 1974, I move to waive the applicable 
sections of that act for purposes of the pending amendment, and I ask 
for the yeas and nays.

[[Page S5434]]

  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The question is on agreeing to the motion.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms) and the Senator from Idaho (Mr. Crapo) are necessarily absent.
  I further announce that if present and voting the Senator from North 
Carolina (Mr. Helms) would vote ``no.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The yeas and nays resulted--yeas 38, nays 60, as follows:

                      [Rollcall Vote No. 150 Leg.]

                                YEAS--38

     Akaka
     Bayh
     Biden
     Bingaman
     Boxer
     Breaux
     Byrd
     Clinton
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Edwards
     Feinstein
     Graham
     Harkin
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Leahy
     Levin
     Lieberman
     Mikulski
     Nelson (FL)
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Stabenow
     Torricelli
     Wellstone

                                NAYS--60

     Allard
     Allen
     Baucus
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Cochran
     Collins
     Craig
     DeWine
     Domenici
     Ensign
     Enzi
     Feingold
     Fitzgerald
     Frist
     Gramm
     Grassley
     Gregg
     Hagel
     Hatch
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Kyl
     Landrieu
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Miller
     Murkowski
     Murray
     Nelson (NE)
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Voinovich
     Warner
     Wyden

                             NOT VOTING--2

     Crapo
     Helms
       
  The PRESIDING OFFICER. On this vote, the yeas are 38, the nays are 
60. Three-fifths of the Senators duly chosen and sworn not having voted 
in the affirmative, the motion is rejected. The point of order is 
sustained, and the amendment falls.
  The majority leader.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that the previous 
agreement for 5 minutes to explain the amendment be vitiated.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that Senator 
Conrad be recognized to make a point of order.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CONRAD. Mr. President, I raise a point of order that the pending 
amendment violates section 311(a)(2)(B) of the Congressional Budget Act 
of 1974.
  Mr. GRAMM. I move to waive the point of order, and I ask for the yeas 
and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The majority leader.
  Mr. DASCHLE. Mr. President, I announce to my colleagues this is the 
last vote of the day.
  The PRESIDING OFFICER. The question is on agreeing to the motion. The 
clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms) and the Senator from Idaho (Mr. Crapo) are necessarily absent.
  I further announce that if present and voting the Senator from North 
Carolina (Mr. Helms) would vote ``yea.''
  The PRESIDING OFFICER (Mr. Nelson of Florida). Are there any other 
Senators in the Chamber desiring to vote?
  The result was announced--yeas 54, nays 44, as follows:

                      [Rollcall Vote No. 151 Leg.]

                                YEAS--54

     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Cleland
     Cochran
     Collins
     Craig
     DeWine
     Domenici
     Ensign
     Enzi
     Fitzgerald
     Frist
     Gramm
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchinson
     Hutchison
     Inhofe
     Kyl
     Landrieu
     Lincoln
     Lott
     Lugar
     McConnell
     Miller
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Voinovich
     Warner
     Wyden

                                NAYS--44

     Akaka
     Biden
     Bingaman
     Boxer
     Breaux
     Byrd
     Cantwell
     Carnahan
     Carper
     Chafee
     Clinton
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham
     Harkin
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Leahy
     Levin
     Lieberman
     McCain
     Mikulski
     Murray
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Stabenow
     Torricelli
     Wellstone

                             NOT VOTING--2

     Crapo
     Helms
       
  The PRESIDING OFFICER. On this question, the yeas are 54, the nays 
are 44. Three-fifths of the Senators duly chosen and sworn, not having 
voted in the affirmative, the motion is rejected. The point of order is 
sustained. The amendment falls.

                          ____________________