[Congressional Record (Bound Edition), Volume 152 (2006), Part 12]
[Senate]
[Pages 16683-16686]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    ISSUES RELATING TO SOUTH DAKOTA

  Mr. THUNE. Mr. President, I rise today to address some issues that 
are pending before the Senate, and I also want to acknowledge what I 
hope will be action we will take somewhere down the road regarding a 
situation in South Dakota that we are experiencing this year.
  We are experiencing what is, I would say, probably a 100-year 
drought. We are having extraordinarily high temperatures. We haven't 
had rain. In fact, the rain accumulations this year in South Dakota are 
less than the rain in many years throughout the Great Depression back 
in the 1930s, and it is having a devastating impact on our economy and 
the farmers and ranchers in South Dakota on which our economy relies.
  In fact, if one looks at the small grain crop, the wheat crop in 
South Dakota was a complete bust, a 100-percent loss in many areas of 
South Dakota.
  The row crops, corn and soybeans, are extremely stressed. Much of 
that crop will be lost this year as well. Cattle producers are selling 
their herds, liquidating their herds, creating all kinds of economic 
issues for my State of South Dakota.
  What I hope is that as time goes on, we will have an opportunity to 
address in some fashion that crisis in South Dakota in the form of an 
emergency disaster relief package.
  There is some money attached, currently, to the agriculture 
appropriations bill that passed at the committee level of the Senate--
it hasn't seen floor action--about $3.9 billion that would apply to 
2005. Obviously, 2006 is much worse in many parts of the country and 
for sure in my State of South Dakota. So I am hopeful we will be able 
to amend that or perhaps move on to some other legislation. I am 
looking at introducing a piece of freestanding legislation, too, that 
would address this situation for 2006.
  My point is this is something which is a dire emergency in my State 
of South Dakota. It literally is burning up out there. We have had 
temperatures that have shattered State records, in the high hundreds--
115, 118--temperatures like that for days and days at a time without 
any rain. In fact, in many cases, there was very little rain going back 
all the way to the very first of this year. It is a historic event. As 
I said, it is probably up to a 100-year type event in terms of the 
actual weather conditions we are experiencing in South Dakota. I hope 
we can draw attention to that issue and get the support of our 
colleagues here in the Senate to address it.
  I also wish to speak to an issue which has some bearing on that in a 
lot of ways--trying to keep people on the family farm, on the ranch, 
keeping these small businesses active, and allowing the next generation 
to move in and assume those operations and continue to create jobs and 
keep the economy going in South Dakota. It is really important.
  Many pieces of legislation with which we will be dealing this week 
bear on this. One, the Energy bill has huge economic consequences to 
farmers and ranchers and small businesses that have to get their 
products to the marketplace and rely heavily on transportation, that 
need the inputs to get the crop planted, and the fertilizer and 
everything with it--all those costs are going through the ceiling as a 
result of high energy costs. Increasing energy supplies is critical.
  The bill we just moved is important. I have another piece of 
renewable fuel legislation which I hope we will be able to get 
agreement on and be able to move across the Senate floor, too, this 
week and get some relief and move the country in the direction that is 
expanding the use of renewable fuels and expanding the sources of 
energy and lessening our dependence on foreign sources of energy.
  We will also be voting on a pension bill this week, which is 
important, but the piece of legislation I want to speak to now is the 
tax bill which will come before the Senate later this week.
  There are several provisions in the bill. One on which I have been 
working for some time is to provide permanent death tax relief. If we 
want to keep farmers and ranchers on the farm, continuing to grow and 
contributing to our economy in this country, we need to do something to 
address what is a very real issue. If we do not take action, in a few 
years here the death tax will rise back up to 55 percent, the top rate, 
and the exemption will drop back to $1 million. Anybody who knows 
agriculture knows that today, with land values being what they are and 
the capital costs associated with agriculture, we need to provide some 
additional relief.
  The death tax reform bill which is going to be considered and voted 
on in the Senate would raise that exemption over a course of time to $5 
million, indexed for inflation, and then for anything over that amount, 
over $5 million, it would tax it at the capital gains rate, which is 15 
percent, and then on amounts above $25 million it would go up to 30 
percent. It would also unify the estate and gift tax to simplify 
planning for people who are having to address, for planning purposes, 
what happens when it comes time to deal with the issue of the next 
generation.
  I have always maintained that when someone dies, they should not have 
to see the undertaker and the IRS on the same visit. We need to do 
something that addresses this issue, that will bring some relief for 
hard-working farmers and ranchers across this country who are trying to 
provide a nest egg, something for the next generation to assume those 
operations and continue to be a part of the business that is an 
integral part of our economy in this country, not just in South Dakota 
but across the entire country. You have small businesses, farmers, and 
ranchers who are adversely impacted tremendously by the death tax. It 
is high time we did something about that.
  There are a lot of people who would argue, and I have heard this 
argued before by Democrats in the Senate, that this is something which 
just benefits the rich. The reality is, regarding the death tax today, 
the people who are actually opposing repealing or reforming the death 
tax are the superrich. The reason is the superrich are not the ones who 
are paying the taxes. They use accountants and lawyers to figure out 
ways around paying the tax. It is those

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small farm and ranch operations, small businesses, that get stuck with 
the bill.
  There are a lot of reasons we need to permanently deal with this 
death tax issue, but one of the reasons is the death tax revenues that 
come into the Federal Government are not all that consequential in 
terms of the overall budget relative to what it costs to collect and 
comply. Death tax revenues were $24.8 billion in 2005. They have 
averaged about 1.3 percent of Federal revenues annually over the past 
10 years. The other side will argue that requiring this tax isn't too 
much to ask from the superwealthy. What they don't consider is all the 
costs imposed on family farms or small businesses to avoid or reduce 
their tax burden. Basic estate planning documents can cost up to 
$50,000. Plans involving limited partnerships can cost up to $250,000. 
One study concluded that in New York, family-owned businesses can spend 
an average of $125,000 on estate planning.
  At the time of death, tax preparation fees can range from $5,000 to 
$50,000, according to some estimates. Often, family-owned farms and 
businesses right on the cusp of the death tax exemption will be 
required to fill out the IRS paperwork to ensure they do not owe 
anything. In 2004, there were 62,718 estate tax returns filed, but only 
30,276 owed any taxes to the Federal Government. What that means is 
that 52 percent of the estates filing a return were required to hire a 
team of accountants, lawyers, and other professionals, only to file a 
few dozen papers with the IRS but pay no tax. What is the point? 
According to what one estimate indicates, the amount spent on avoiding 
the death tax could be approximately equal to the amount of revenue 
generated.
  This is not good policy. The cost of repealing the death tax raised 
the ire of the Wall Street Journal editorial page, and here is what 
they said:

       The Joint Committee on Taxation refuses to take any account 
     of the potential economy-wide benefits of repeal: more 
     investment in family businesses, more money spent on creating 
     jobs than on buying life insurance to pay death taxes, and a 
     higher savings rate. Many studies have found these positive 
     effects could be large and would mean much smaller revenue 
     losses from getting rid of the tax.

  If you listen again to the rhetoric of those who are opposed to 
reforming the death tax, I think we have to be careful when we hear 
that rhetoric as they begin to describe the cost of this tax relief 
because their record really has not been very good of late.
  In 2003, we reduced the capital gains and dividend tax rate as part 
of the economic stimulus package. At that time, Democrats in the Senate 
argued it would add to the deficit and burden our budget. In fact, 
earlier today the Senator from North Dakota, Mr. Conrad, was in the 
Chamber talking about how this would adversely impact the long-term 
budget outlook and how it would impact the deficit. But he said the 
same things back in 2003 when talking about capital gains and dividend 
tax relief. He said these tax cuts will worsen the long-term budget 
outlook, adding to the Nation's projected chronic deficits.
  Three years later, we now see the other side of the aisle could not 
have been more wrong on this issue. The capital gains and dividend rate 
reductions have paid for themselves many times over in the form of 
increased Government revenue. May's budget report from the Treasury 
Department has tax receipts up by about $206 billion, which is a 13-
percent increase for the first 9 months of fiscal year 2006. The year 
before--between 2004 and 2005--there was a $274 billion increase, or 
14.6 percent more in Federal revenues for fiscal year 2005 than 2004.
  Again, let me emphasize, reducing capital gains and dividends tax 
rates generated more Government revenue to the Federal Treasury, not 
less. That sometimes seems counterintuitive to the Democrats, people on 
the other side.
  I would argue as well that some of the people who are doing these 
estimates have, certainly in this case, been proven wrong. I think the 
same would be true with respect to reforming the death tax in the way 
that has been proposed here and that we will have a chance to vote on 
later this week. But reducing capital gains and dividends taxes spurred 
economic growth, and it increased Government revenue--not decreased--
increased Government revenue by $275 billion between 2004 and 2005, and 
already in the first 9 months of this year, $206 billion, which is a 
13-percent increase over the previous year.
  Again, I would say that as it relates to the estimates that have been 
made in the past and the rhetoric and many of the prognostications that 
have come from the other side, it clearly has been a very different 
outcome, a very different result, a very different record when it comes 
to revenues coming into the Federal Government from reducing capital 
gains and dividends rates.
  Some on the other side are also arguing that only the superrich pay 
the death tax and that Warren Buffett and the Gates family are the ones 
who are really going to benefit from this. Warren Buffett and the Gates 
family have both been vocal in their support of keeping the death tax. 
As I said earlier, the reason is they are not the ones paying it. They 
have armies of accountants and lawyers to figure out ways to get around 
it. Don't let yourself think their estates will be subject to the tax. 
There are lots of folks who will make sure they never have to see the 
55 percent of the value of their estates being taxed. In fact, Warren 
Buffett and Bill Gates have both figured out ways to shelter their net 
worth in charitable foundations. That is obviously their right, and we 
appreciate and are grateful for their generosity. But if the superrich 
support keeping the death tax but have figured out ways to avoid it, 
who actually is paying the tax? The smaller, family-owned farms and 
businesses are the ones that pay it because they didn't spend the money 
preparing to avoid it. That is why agriculture and big industry support 
repealing this very onerous tax.
  If you look at the folks who are in favor of getting rid of this tax, 
it is not the superrich that the other side argues would benefit from 
repealing the tax or at least reforming it in the fashion that has been 
proposed. It is the organizations that represent the small, family-
owned businesses and farmers and ranchers in this country. The list of 
those who support repealing the Federal death tax includes the Farm 
Bureau Federation, the National Cattleman's Beef Association, National 
Pork Producers Council, the National Federation of Independent 
Business, National Association of Home Builders, Large Equipment 
Distributors Association, Beer Wholesalers Association, National Tax 
Limitation Committee, National Wholesalers and Distributors 
Association, National Taxpayers Union, Forest Landowners Association, 
American Family Business Institute, National Grocers Association, U.S. 
Chamber of Commerce, National Association of Manufacturers, American 
Tool Manufacturers Association. In my State, South Dakota, Petroleum 
and Propane Marketers Association, South Dakota Association of 
Convenience Stores, the National Restaurant Association, American 
International Automobile Dealers Association, Family Research Council, 
the Black Chamber of Commerce--the list goes on and on.
  My point simply is that as we engage in this debate this week, the 
arguments are going to be made, as they have been already, and the 
issue framed in a way by the Democrats that, again, this is somehow 
something which will benefit the superrich. As I noted, the superrich 
are the ones coming out to say we don't need to repeal this. The reason 
they say that is because they are not going to be paying it because 
they have at their disposal the lawyers and accountants and 
professionals who can figure out a way to keep them from having to pay 
it. The people who get stuck paying the death tax in this country are 
the small farms, the ranch operations, the small businesses, the people 
who are just trying to put together a little bit of equity, a little 
bit of assets that they can then pass on to the next generation and 
keep that family business growing and prospering.
  It just seems to me that as a matter of principle, death should not 
be a taxable event. We should not be taxing people throughout their 
entire lifetime

[[Page 16685]]

on everything they earn, on everything they acquire, on everything they 
buy, and then when death rolls around say: We are going to take 50 
percent of everything you have acquired during the course of your 
lifetime and give it to the Federal Government. And as I said, much of 
the cost associated with either collecting or complying with the death 
tax actually negates, I believe, the positive revenue benefit that 
comes into the Federal Treasury to start with.
  As I said earlier, I think you will find when this happens--and I 
hope it does happen because I hope we get the votes to pass it later 
this week--that you will see what happens with the death tax repeal is 
the same thing that happened when we reduced capital gains and dividend 
tax rates, and that is you will see more expansion, more investment, 
and actually more Federal revenues coming into the Treasury, which has 
been the record with the capital gains and dividend tax reductions.
  I might again repeat, because I think it is worth noting and because 
it is an important part of the debate and the other side maybe will 
come over here and talk about how this will add to the deficit, how 
much this is going to cost the Government in terms of lost revenue, how 
it is going to only benefit the superwealthy. Let's remember again who 
is paying the tax, and let's also remember again when we reduced 
capital gains and dividend tax rates, we got more Government revenue 
and not less.
  Let's move forward. Let's do something that has been on the agenda 
here for a very long time. Failure to act on the part of this Congress 
means that in the year 2010 going into 2011, these rates start kicking 
back in. We provided some temporary relief in previous tax bills. But 
if we don't take action to permanently address this issue, then people 
who pass on in the year 2010 and beyond that rate are going to be 
paying on everything they pass on to their next generation; 55 percent 
is going to be taken by the Federal Government.
  It is an issue that needs to be addressed. It has been acted on in 
the House--not once but on multiple occasions. In fact, the House voted 
last week on this total package which includes the death tax repeal. It 
also includes extension of some other tax relief measures and an 
increase in the minimum wage. The vote coming out of the House was a 
fairly big bipartisan vote, with 34 Democrats in the House of 
Representatives voting with the majority of Republicans in the House to 
send it over to the Senate. We are faced right now with this vote on 
Friday on whether we are going to do something that will address once 
and for all this situation that the death tax creates for estates, for 
businesses, family farms and ranch operations going forward, whether we 
are going to address these other tax issues which also expire.
  I might add that in my State of South Dakota, there is one on this 
list that is extremely important to the people I represent, and that is 
the State and local sales tax reduction. We are not an income tax 
State. We don't have a personal or corporate income tax. We do have a 
sales tax. For a long time, people who paid State income tax got to 
deduct that on their Federal tax return. People who had sales tax and 
used the sales tax as basis for taxation were not able to take the same 
benefit. We changed that in 2003. That is set to expire. If we don't do 
something to extend that tax relief, then people in my State of South 
Dakota and other States across this country who use the sales tax as 
their primary source of raising revenue to fund State governments are 
going to lose this deduction. That again creates an inequity between 
States that use the sales tax and those States that use the income tax 
to fund their governments.
  There are other things on this list as well--college tuition 
deduction, work opportunity tax credit, welfare to work tax credit, 
timber capital gains that are also on the list of taxes, tax revenue 
that would be extended, teachers' classroom expenses deduction, 
something a lot of teachers across this country have benefited from.
  My point very simply is these are all things included in this 
package. This is our one opportunity to get this vote. I think there 
are those on the other side who are hopeful they can take this down and 
then they will figure out a way to split these things off. But I think 
it is fair to say we have this one opportunity. We get one shot. We get 
one shot at providing some permanent death tax relief by extending 
these death tax relief measures that are set to expire, and we get one 
shot at an increase in the minimum wage.
  I think if you look at this body and the way it works, there is a 
sort of sense of finding a consensus. It has been a long-time priority 
for our colleagues on the Democratic side to get an increase in the 
minimum wage. There is a phased increase in the minimum wage in this 
bill.
  There has been a long-term priority for those of us on this side to 
be able to provide some death tax relief for farmers and ranchers and 
small businesses in this country. This bill accomplishes that.
  It is not a total repeal. As I said, I think it is a very modest 
approach. It goes to $5 million for an individual and $10 million for a 
couple, basically if you have a spouse, and it also uses after that 
amount the capital gains tax rate as a level of taxation up to $25 
million at which point it would be a 30-percent rate.
  So it is not a complete repeal. You are still going to capture the 
superrich who are going to pay the 30-percent rate because most of 
their estate assets are going to be well over the $25 million threshold 
or limit.
  So this is a moderate, modest approach. It represents what this 
institution is about; that is, trying to bring both sides together, 
trying to figure out where that middle ground is and form a consensus 
around these issues. The minimum wage, as I said, is phased in. The 
estate tax death tax relief is phased in. It doesn't happen overnight. 
It is phased in to get up to the $5 million unified credit, or the 
exemption. And then these other tax extenders are something I think 
most Members here in the Senate on both sides at one time or another 
have supported and voted for. I would argue it is very important to 
many of their constituencies.
  Again, if you are a State such as my State of South Dakota that 
relies on State sales tax as your primary source of revenue to fund 
State government, extending the deductibility of that is a matter of 
fairness for those States that have income tax and, therefore, are able 
to deduct the State income taxes they pay.
  Again, it has been voted on in the House by a big bipartisan vote 
coming out of the House.
  This is an opportunity, I think, for this Senate to come together on 
a set of priorities which reflect, I think, the agendas of both sides.
  As he said, the minimum wage increase is something that the Democrats 
have been advocating for some time. I voted for a minimum wage increase 
in the past coupled with small business tax relief.
  The estate tax--or death tax--relief is something our side has been 
actively working on for years. As a Member of the House, we voted 
numerous times on this and now as a Member of the Senate I will have 
that same opportunity.
  Of course, the extension of the other forms of tax relief are in this 
bill. We get one shot. I hope Members on both sides will recognize what 
an incredible opportunity we have right now to address this whole range 
of issues that have been languishing here for a long time, and do 
something that will be meaningful in terms of continuing to give our 
entrepreneurs in this country, small businesses, farm and ranch 
operations the opportunity to grow, to continue to build wealth, to 
create jobs, and to keep the economy strong. That is what this 
particular bill and what it contains is all about.
  Again, my hope is that at the end of the day we will see a good, 
strong, bipartisan vote in the Senate as we saw in the House of 
Representatives, and be able to send this on to the President where he 
can sign it into law and we can demonstrate to the people of this 
country that we are addressing the issues they care deeply about and, 
most importantly, I say to them the

[[Page 16686]]

issue of the economy, and dealing with energy costs today with an 
energy bill, dealing with the death tax, dealing with the minimum wage, 
dealing with these other forms of tax relief are all things that have 
been on the agenda for some time.
  I believe we have an opportunity to get this done. I hope we can.
  I appreciate the work of my colleagues who have labored so diligently 
to get this far in the process, to get it on the floor for a vote. I 
hope when Friday rolls around and we have this vote that we will have 
the 60 votes necessary to move forward and to get this done once and 
for all.
  I yield the floor.

                          ____________________