[Congressional Record (Bound Edition), Volume 155 (2009), Part 24]
[Senate]
[Pages 31962-31963]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           ESTATE TAX REFORM

  Mr. REID. Mr. President, on a final point, for some time now we 
Democrats have been trying to reform the estate tax to avoid the train 
wreck that is coming next month.
  Because of the legislation passed by the Republicans in 2001, the 
estate tax is repealed for 2010--gone, nothing. But because of the 
gimmick they used to pass this legislation, the estate tax returns in 
2011, and it does so at the levels that were in effect in 2001.
  This chicanery has created a nightmare for families trying to plan 
their affairs.
  We have proposed a responsible path forward toward curing the estate 
tax problem. We proposed to extend the current tax parameters so that 
in 2010 couples would be able to pass down up to $7 million completely 
tax free. An estate tax at that level exempts all but the wealthiest 
two-tenths of 1 percent of estates from paying any estate tax.
  The other side has rejected this reasonable approach. Instead, they 
want to keep the Bush tax law in place for 2010 as originally designed.
  The irony in the Republicans' position is, it hurts the very 
families--small business men, women, and family farmers--whom they 
claim they are trying to help.
  The surprise facing family farms and family-owned small businesses in 
2010 is that repeal of the estate tax will actually increase their tax 
liabilities. These are families who would never pay the estate tax 
because they don't have assets totaling more than $7 million for a 
couple.
  So why do they face a tax increase? It has to do with a provision in 
the Tax Code called stepped-up basis. What does this mean? The assets 
of family-owned businesses are often in the form of unrealized capital 
gains, the appreciation of the family business over time. Right now, 
until the end of this year, December 31, these capital gains are 
forgiven when a person dies--no capital gains at death and for these 
families with less than $7 million there is no estate tax under current 
law. Therefore, for these families, death is not a taxable event.
  The capital gains tax is forgiven because the heirs to the property 
receive a step up in its basis for measuring tax liability when they 
ultimately sell the property.
  The law my Republican colleagues insist go into place next month 
repeals stepped-up basis.
  The bargain my Republican colleagues are advancing is simple. If you 
are rich, celebrate. If you are not, you should be afraid. If you are 
very wealthy, you get a huge windfall from repeal of the estate tax. If 
you are modestly successful--say you have a shoe store, a service 
station, a small farm, or whatever small business--but not to the point 
where you are facing an estate tax liability, your heirs will, 
nonetheless, face a tax increase because of the repeal of the estate 
tax.
  For the wealthiest families in this country, they say don't worry 
about that. The estate tax is gone. For many more small businesses, 
Republicans say that is too bad. All these years, as Republicans were 
using family farms and small businesses as props in their zeal to 
repeal the estate tax, their real goal was protecting the wealthiest of 
the wealthy. The unfortunate aspect of that campaign is that repeal of 
the estate tax, even for just 1 year, will come at the expense of 
family-owned farms and small businesses.
  We asked, last night, and it will be asked again by the chairman of 
the Finance Committee, the senior Senator

[[Page 31963]]

from Montana, Mr. Baucus, to extend the estate taxes that now exist, 
giving a couple an exemption of up to $7 million for 2 months while we 
work things out on that and a number of other issues, but that has been 
rejected by my friends on the other side of the aisle.
  I repeat: If the estate tax lapses for a period at the beginning of 
2010, this will be a boon for the wealthy, a huge drain on the U.S. 
Treasury and, more importantly, let me also note that tens of thousands 
of middle-class families could suffer. If the estate tax lapses, even 
for a short period, these families will be subject to capital gains 
when they sell their inherited or bequeathed property, a process that 
will be enormously complicated for families who have no estate tax or 
planning issues today. Although this could be retroactively eliminated, 
in the meantime the uncertainty and planning around this would affect a 
large number of families who ordinarily don't have to think about the 
estate tax.

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