[Congressional Record (Bound Edition), Volume 145 (1999), Part 15]
[Extensions of Remarks]
[Pages 21160-21161]
[From the U.S. Government Publishing Office, www.gpo.gov]



                       PHASING OUT THE DEATH TAX

                                 ______
                                 

                           HON. JENNIFER DUNN

                             of washington

                    in the house of representatives

                      Wednesday, September 8, 1999

  Ms. DUNN. Mr. Speaker, one of the most important objectives of this 
Congress is the elimination of the federal estate tax, or death tax.
  It is unfair to tax people because the head of a family dies and 
leaves a family business or other asset to his or her children. We 
should reward savings, investment, and hard work. We must be fair in 
our tax system.
  Throughout my tenure in Congress, I have focused on phasing out the 
onerous death tax. Despite the efforts of individuals working a 
lifetime in building a business, the federal government can take more 
than half of these savings upon the death of the owner.
  The publication ``Investor's Business Daily'' (August 19, 1999) ran 
an excellent article entitled ``Time to Chop Down the Death Tax?'' I 
commend it to the attention of my colleagues as it outlines the 
problems the federal estate tax causes.

                    Time To Chop Down the Death Tax?


             It Leaves Many Heirs Hanging With Sudden Debt

                           (By Peter Clearly)

       Chester Thigpen's wealth is in his land. Thigpen, an 87-
     year-old grandson of slaves, has spent his entire life 
     building an 850-acre tree farm in Montrose, Miss. He'd like 
     to leave the farm to his family.
       There's one problem: Thigpen's farm would be assessed at a 
     value much higher than the $650,000 exemption allowed by the 
     federal estate tax. When he dies, his family will face a 
     hefty tax bill.
       That's why they're unhappy with President Clinton's threat 
     to veto the tax-cut plan passed by Congress. The GOP-backed 
     plan would phase out the estate tax, also known as the death 
     tax, over the next 10 years.
       If Clinton vetoes the bill, Thigpen's heirs say they won't 
     have enough cash to pay the tax. They aren't sure what 
     they'll do.
       Critics of the estate tax cite cases like the Thigpens' to 
     argue that the estate tax has little value. It accounts for 
     only 1% of federal revenue. And it causes heartache for lots 
     of folks like Chester Thigpen.
       They've spent their lives building a legacy for their 
     families, only to face the prospect that the Internal Revenue 
     Service will force their dreams to die with them.
       The estate tax does have its fans. Some vocal backers, like 
     the lobbying group Citizens for Tax Justice, say the Thigpen 
     family's story isn't typical--only one of 20 farmers leave a 
     taxable estate. Nonfarm family businesses are only a small 
     part of the people and businesses subject to the tax.
       Citizens for Tax Justice also notes that only the 
     wealthiest 1.4% of Americans pay the estate tax. The tax's 
     progressive nature is reason enough to keep it.
       Gary Robbins, an economist with the Institute for Policy 
     Innovation, counters that even if you take CTJ's figures at 
     face value, the death tax is discriminatory.
       ``Only about 1% of Americans are subject to the death tax, 
     but according to CTJ's numbers, you are twice as likely (as 
     that) to be forced to pay the tax if you are a farmer and 
     three times as likely if you own a small business,'' Robbins 
     said.
       Robbins also notes that farmers and small-business owners 
     are usually asset rich and cash poor. That makes the death 
     tax a toucher burden on those who must pay it.
       For many, he argues, the only way to settle the estate tax 
     obligation to the IRS is to sell off assets or land--parts of 
     the businesses that are critical to keep those family 
     operations viable.
       A law that forces people to sell their farms and businesses 
     when a family member dies: How did we get to this point?
       In the early 1900s, politicians became concerned about the 
     growing concentration of money in a few families. Lawmakers 
     called for a ``progressive tax'' on rich families to prevent 
     them from passing down their wealth from one generation to 
     the next.
       In 1916, the estate tax was enacted; it was meant to fund 
     national emergencies. Then in 1924, Congress passed the first 
     gift tax, after people started giving away their estates so 
     their heirs could avoid paying the estate tax.
       From 1932 to 1941, as part of the New Deal, estate tax 
     rates were raised to help pay for the new spending programs. 
     At that time, estate taxes reached records, accounting for as 
     much as 9.7% of federal tax revenue.
       Here's how the estate tax is now assessed:
       Estates valued up to $10 million pay taxes on a graduated 
     scale: rates range from 37% to 55%. The first $650,000 is 
     exempt--and not indexed for inflation.
       Estates valued between $10 million and $21 million are 
     taxed at a 55% rate, plus a 5% surcharge. As the value of an 
     estate approaches $21 million, the surcharge effectively 
     phases out the $650,000 exemption.
       Estates values at more than $21 million face a tax rate of 
     55% with no exemption.
       The 60 Plus Association, a lobbying group whose rallying 
     cry is ``dying should not be a taxable event,'' says the 
     estate tax is an ineffective way to raise money.
       ``Federal revenue raised from death taxes as a percentage 
     of total revenue has been on a steady decline since 1940,'' 
     said Jim Martin, president of 60 Plus.
       ``The death tax now brings in about 1% of total federal 
     revenue, and it costs the government 65 cents for every 
     dollar raised for enforcement and compliance costs,'' he 
     said.
       ``Taxes are a necessary evil, but a tax should have some 
     sort of socially redeeming value.'' Martin added. ``The death 
     tax just sets up an industry of lawyers, accountants and 
     insurance brokers to help people protect their after-tax 
     assets.''
       Some lawyers counter that the estate tax is really 
     voluntary. It's paid by people who can't afford legal or 
     accounting services or who don't realize the IRS will 
     consider them rich at the time they inherit estates.
       ``That's just what the American people want to hear--hire 
     more lawyers so you can keep out of trouble,'' said Rep. 
     Jennifer Dunn, R-Wash., one of the estate tax's most forceful 
     opponents.
       ``The cost of compliance is extraordinarily high for the 
     death tax.'' Dunn said. ``For the amount of money that is 
     raised by the Federal Government, an equal amount is spent on 
     hiring CPAs, lawyers and so forth. . . . This is money that 
     should be spent much more wisely, and would be, if families 
     did not have to spend so much money on compliance.''
       House Majority Leader Dick Armey, R-Texas, agrees.
       ``I've seen time and time again sons and daughters whose 
     grief has been ameliorated by the thought of keeping their 
     parents' legacy alive,'' he said. ``And when that family is 
     forced to sell off Mom and Dad's business that they spent 
     their entire life building to meet the needs of the tax man, 
     you can hardly call that voluntary or just.''
       GOP pollster Kellyanne Fitzpatrick says most people think 
     the estate tax is unfair--even though it hits mainly people 
     the IRS considers wealthy.
       In a poll she did for 60 Plus, 77% considered the tax 
     unfair. The tax was unpopular among many groups. For example, 
     86% of women age 18 to 34 who don't have kids said the tax is 
     unfair; so did 84% of 55- to 64-year olds, 82% of Protestants 
     and 82% of Republican women.
       ``You don't have to be directly affected by (the tax's) 
     unfairness or unjustness to oppose it.'' Fitzpatrick added.
       Getting rid of the estate tax could have an unintended 
     consequence: protecting the environment.
       Dunn says some environmental groups are warming to the 
     notion of repealing the estate tax.
       Those who oppose suburban sprawl complain that many family 
     farmers who have to pay estate taxes must sell at least part 
     of their land, often to developers who may not be as friendly 
     to the environment.
       That brings us back to tree farmer Chester Thigpen. He has 
     spent more than 55 years building his family business. He has 
     won a number of awards for his sound environmental 
     stewardship.
       In 1995, Thigpen was named Mississippi Tree Farmer of the 
     Year. The next year, he was National Tree Farmer of the Year. 
     He received that award for his exceptional management 
     practices, including reforestation, taking care of his 
     timberland and maintaining wildlife habitat.
       In addition, in 1998 the National Arbor Day Foundation gave 
     Thigpen its Good Steward award.
       ``He (Thigpen) is commended for a lifetime of agricultural 
     and forestry work, as exemplified in his conversion of 850 
     depleted acres

[[Page 21161]]

     of soil into a lush area of tree farms,'' said an Arbor Day 
     Foundation press release.
       If Clinton vetoes the GOP's tax plan and leaves the estate 
     tax in place, the Thigpen family may not be able to maintain 
     that sound stewardship after Chester dies. Family members say 
     they may be forced to clear-cut several stands of timber and 
     sell the lumber just to pay the estate tax.
       As they say, money, especially when it's meant to pay the 
     tax collector, doesn't grow on trees.

               TAXING DEATH--TOP MARGINAL ESTATE TAX RATES
------------------------------------------------------------------------
                                                                Rate
                          Country                             (Percent)
------------------------------------------------------------------------
Japan.....................................................          70
U.S.......................................................          55
Taiwan....................................................          50
South Korea...............................................          45
France, Great Britain.....................................          40
Germany, Sweden...........................................          30
Belgium...................................................          28.5
Netherlands...............................................          27
Chile, Italy..............................................          25
Denmark, Hong Kong........................................          15
Singapore.................................................          10
Poland....................................................           7
Brazil....................................................           6
Argentina, Australia, Canada, China, India, Indonesia,              0
 Mexico...................................................
------------------------------------------------------------------------
Source: American Council for Capital Formation.




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