[Congressional Record Volume 151, Number 18 (Thursday, February 17, 2005)]
[Senate]
[Pages S1633-S1634]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KYL (for himself, Mr. Nelson of Florida, Mr. Allard, Mr. 
        Allen, Mr. Burns, Mr. Inhofe, Mr. Talent, and Mr. Thune):
  S. 420. A bill to make the repeal of the estate tax permanent; to the 
Committee on Finance.
  Mr. KYL. Mr. President, today I am pleased to introduce the Death Tax 
Repeal Permanency Act of 2005 along with Senator Bill Nelson. This 
bipartisan legislation will make the death tax a thing of the past.
  As we all know, Congress, working with President Bush, enacted 
bipartisan legislation in 2001 to phase out and eventually repeal the 
death tax in 2010. Unfortunately, because we did not have the 60 votes 
we needed to avoid a filibuster by opponents of the cuts, we could not 
make the repeal permanent. Rather, under Senate rules, the cuts could 
only be extended for the term of the budget: 10 years. As a 
consequence, the death tax springs back to life in 2011, at its old 
rate of up to 60 percent and at its old exemption level of only $1 
million. Senator Nelson and I understand that this tax structure is 
simply unworkable for families and family businesses. We agree that the 
best solution is to simply get rid of the death tax once and for all. 
That's why we are introducing legislation today to make death tax 
repeal permanent.
  Senator Nelson and I are joined in this effort by Senators Allard, 
Allen, Burns, Inhofe, Talent, and Thune, and we have the full support 
of President Bush, who once again included permanent repeal of the 
death tax in his Fiscal Year 2006 budget proposal.
  The death tax is an unfair, inefficient, economically unsound and, 
frankly, an immoral tax that should be removed from the tax code. A 
recent survey found that 58 percent of Americans believe the death tax 
is ``completely unfair.'' In contrast, only 10 percent of those 
surveyed said the same about sales taxes. Moreover, this view is shared 
by Americans across income levels and political parties: 61 percent of 
Americans making less than $30,000 a year believe the death tax is 
``completely unfair''; 89 percent of respondents who supported 
President Bush in the last election and 71 percent of respondents who 
supported his opponent in the last election label the death tax 
somewhat or very ``unfair.''
  And the death tax is unfair, first of all, to the decedent and to his 
or her heirs. We are talking about people who work hard throughout 
their lives, perhaps start businesses, or perhaps buy homes in fast-
growing metropolitan areas where real estate values are skyrocketing. 
Or it could be such a person owns a farm or just works hard in a 
company owned by others, but that person saves and invests and 
eventually accumulates a small but respectable nest egg. As you can 
see, the tax reaches far more than the ``ultra-rich,'' its intended 
targets when it was first imposed. The American dream is to be able to 
leave these assets to one's children so that they might enjoy a better 
life than their parents. It is simply unfair and immoral for the 
government to take more than half of these assets at death.
  Americans understand that the death tax is unfair because it falls on 
families when they have the least ability to make significant economic 
decisions: at the time they lose a loved one. Further, it is unfair 
because expensive tax planning can significantly ease the effect of the 
death tax. If you have the money to hire the right lawyer, buy the 
large insurance policies that are needed, and do the proper planning, 
your family can be spared much of the financial pain caused by the 
death tax. If, on the other hand, you die without warning or if you 
have an unexpectedly large estate due to increased property values and 
prudent investments, you are caught paying a larger tax. Taxes required 
as a result of intentional, planned economic decisions are one thing; 
taxes on an untimely death are quite another.
  Not only is the death tax unfair; it hurts economic growth. The death 
tax creates a disincentive to build a family farm, ranch, or other 
business with the goal of passing it on to one's children. In some 
cases, it makes more sense for a family business to be sold when the 
owner retires, since the taxes, primarily capital gains taxes, are 
going to be much lower if the assets are sold while the owner is still 
alive. Further, planning for the death tax makes it harder to expand a 
family business because needed resources are spent on attorneys and 
life insurance instead of growing the business. As much is spent each 
year on such ``avoidance planning'' as is collected in death taxes by 
the government.
  The death tax also hurts economic growth by discouraging savings and 
investment. Whether it falls on a family business built through hard 
work or on a family with a home and a lifetime of investments in 401(k) 
and IRAs thanks to prudent living, it claims nearly half of an estate 
over the unified credit amount ($1.5 million in 2005) for the federal 
government. Such confiscatory tax rates give people little incentive to 
save and invest. What's more, the American people understand that the 
death tax represents multiple levels of taxation. Fully 80 percent of 
those in a recent survey said that the tax represents an ``extreme'' 
form of ``triple taxation.''
  The death tax has a broader economic reach than to just those 
immediately hit with the tax. Suppose a small business employs 25, 
maybe 30 people, all of whom rely on the business for their livelihood, 
health insurance, and retirement savings. The entrepreneur's heirs may 
not have enough cash to pay the applicable death tax, so they may be 
forced to liquidate the business. Depending on who buys the assets and 
what is done with them, the employees may now have to find other jobs. 
Moreover, all of the companies that sold items to or bought items from 
this business might need to find other suppliers or customers, leaving 
a hole in the economy. According to the IRS ``Statistics of Income,'' 
estate and gift taxes only brought in about $22.8 billion in fiscal 
year 2003 barely more than one percent of all gross tax collections by 
the Treasury Department. For such a small amount of revenue, the death 
tax inflicts a disproportionately large amount of damage on the 
economy.
  One of the most interesting statements about the death tax was made 
by Edward J. McCaffrey, a law professor from the University of Southern 
California and self-described liberal, in testimony before Congress 
several years back. He said, ``Polls and practices show that we like 
sin taxes, such as on alcohol and cigarettes. . . . The estate tax is 
an anti-sin, or a virtue, tax. It is a tax on work and savings without 
consumption, on thrift, on long term savings.''
  I urge Congress to act this year to end this tax on virtue, work, 
savings, job creation and the American dream, and to end it 
permanently.
  Mr. NELSON of Florida. Mr. President, I rise today with my colleague 
from Arizona, Senator Kyl, to introduce a bill that will eliminate the 
death tax once and for all. I want to thank my friend for his tireless 
leadership in fighting to completely and permanently repeal this unfair 
and unwise tax. I am proud to join him in this bipartisan effort.
  First, though, I think a little historical context is important. 
Remembering back to 2001, this body passed a tax cut bill that set us 
on the path toward full repeal of the death tax. Under this plan, 
between 2001 and 2009, the tax gradually is phased out, reducing the 
marginal rates and increasing the amount that would be exempt from 
taxes.
  Then, in 2010, the death tax will be eliminated. But it springs back 
to life in 2011 at the level it was in 2001.
  Today, the legislation we are introducing tends to Congress' 
unfinished business. Our bill eliminates the so-called ``sunset'' date 
and, simply put: keeps the death tax dead.

[[Page S1634]]

  This is an important point. It is a matter of intellectual honesty 
and provides much needed stability in estate planning. No one ever 
truly expected the death tax would revert to pre-2001 levels. This was 
a quirk of the budget process, and something I always believed would be 
remedied.
  Without action to create permanence in the Tax Code, this on-again, 
off-again, then on again approach makes estate planning complicated and 
uncertain. As it stands now--financially speaking--2010 will be a good 
year to die, but dying in 2011 will be very expensive for your heirs. 
This was never Congress' intent.
  Furthermore, I believe the cost of planning is a tremendous burden on 
our economy. Rather than reinvesting resources in their businesses, 
Americans are paying lawyers, accountants and insurers to help insulate 
their families from the cost of the death tax. Typical business owners 
are more concerned about avoiding the tax than investing in their 
businesses and making money, which creates jobs and stimulates the 
economy.
  I echo the feelings of an editor at the Arkansas Democrat-Gazette, 
who in 2001 called this tax ``an un-American drag on the American 
Dream--and economy.''
  Since my election in 2000 it has been a priority of mine to do away 
with this tax, helping business owners and family farmers to improve 
their children's standard of living, and to reinvest in the nation's 
economy. This is the wrong tax levied at the wrong time; we should not 
be taxing individuals at death, forcing family members to make a choice 
between selling assets or keeping the family business.
  In particular, farmers in Florida are affected more than their fair 
share by this tax. With the high price of land, farms can easily 
outgrow the exemptions in current law. When a parent dies, children are 
forced to sell the land in order to cover the death tax. A family 
legacy is lost, and so are jobs.
  I am proud to introduce this bill today, and I look forward to 
working with Senator Kyl as we try to lend some stability and 
sensibility to how taxes are levied at death.
                                 ______