Providing for consideration of the bill (H.R. 8) to make the repeal of the estate tax permanent.

Mr. Speaker, pursuant to House Resolution 202, I call up the bill (H.R. 8) to make the repeal of the estate tax permanent, and ask for its immediate consideration.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within

which to revise and extend their remarks and include extraneous material on H.R. 8.

Mr. Speaker, I yield myself 5 minutes.

Mr. Speaker, I appreciate the fact that we are here today poised to pass H.R. 8, the Death Tax Repeal Permanency Act of 2005.

On behalf of the lead Democratic sponsor, my colleague, the gentleman from Alabama (Mr. Cramer), as well as the over 200 bipartisan Members who have co-sponsored this bill, I am pleased that we are poised to pass in this body this commonsense legislation.

I would like to talk about a couple of constituents, particularly a constituent named Howard Effert who is a resident of Columbia, Missouri, who in 1965 began a lumber yard business there in Columbia. He contributed $100, which was a very modest contribution, as he had three young children to provide for with a modest wage.

He had the idea and a desire for a new venture even though many within the community felt this venture would be unsuccessful, but yet his partners helped him provide the financial assistance and of course some valuable mentoring to help him open the doors to this lumber business.

Fast forward now 40 years. His two sons, Brad and Greg, are running the day-to-day operations of the business. Of course, they want this family business that has been in their family since its modest beginnings in 1965 to be able to be passed on pursuant to the American Dream, that is, to create a legacy, to help your children be better off than you were.

Yet the Effert family today, Mr. Speaker, has to write a check for $1,000 a week, $52,036 to be precise, to purchase a term life insurance policy, the proceeds of which will be to pay the Federal Government on that inevitable day that Howard Effert passes from this world to the next.

In 2001 we passed historic legislation that let all income tax payers keep a little bit more of what they earned, and this historic legislation included a repeal of the Federal death tax which was a top tax priority for a lot of small business and family farm groups. Thus under current law, the death tax is gradually phased out between now and 2010. This is accomplished by increasing the exemption from the tax. Currently it is $1.5 million shielded from this very confiscatory tax, and at the same time we chip away at that top rate, which was as high as 55 percent, and in fact, in a few isolated instances as high as 60 percent tax. We now chip that away, and it is currently 47 percent.

Unfortunately, as we know, the death tax does not stay dead and buried. As things now stand, it will rise from the grave in 2011, and it will revert to its form prior to 2001. Now, this quirk in the law can be directly attributed to the Senate's Byrd Rule, which applies to the consideration of reconciliation bills.

As a matter of basic fairness, we must permanently repeal the death tax. The death of a family member quite simply should not be a taxable event. And if it was good policy when we enacted it in 2001, it remains a good idea today.

Let me touch briefly on some policy rationales for finishing this unfinished work. The death tax is fundamentally unfair. By its very structure, the tax punishes thrift, savings, and hard work. Conversely, the tax forces taxpayers to engage in a host of economically inefficient activities to avoid the very punitive nature of the tax. Not only does this have a very real effect on taxpayers and their behavior but a negative impact on the economy.

With a tax like the death tax, a family business or farm has no choice but to divert these precious resources, as in the case of the Effert family, to plan financially for the financial impact for the tax: money that could be used to expand the business, to purchase a forklift, to bring another person on the payroll, whatever is in the best interest of that business. Instead, this money is diverted in anticipation of this very punitive tax.

Now, supporters of retaining the death tax will claim that perhaps redistribution of income promotes economic fairness and social responsibility. We will get to have that debate. I respectfully disagree. Instead of rewarding savings and investment, this tax actually rewards those who spend lavishly and leave no ongoing business interest or assets to the next generation.

I am mindful of the bumper sticker that I saw recently traveling Missouri's highways on a big recreational vehicle that says ``I am spending my children's inheritance.''

If you wanted to give some good estate tax advice to someone that has put together some assets to pass along, it would be simply to consume it. Yet as we talk about some sort of tax reform and perhaps a consumption tax, this tax actually focuses on non-consumption and on thrift and savings.

For that and for a variety of reasons, we will have the opportunity, I hope, in a good debate, in a civil discourse. I think we should permanently repeal the death tax. We should enact H.R. 8.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, a lot of individuals have worked on H.R. 8, and I yield 2 minutes to the gentleman from California (Mr. Herger), one of those individuals.

Mr. Speaker, I yield myself 30 seconds.

I am sure the gentleman from Michigan misspoke, and I am certain it was inadvertent. The bill, H.R. 8, actually does allow for a step up in basis of $3 million for a surviving spouse and another $1.3 million for surviving heirs.

If the intent of the legislation, which it is, is to help family businesses be passed from one generation to the next and the surviving heirs choose not to farm or continue the family business, then they are the ones making the taxable decision to dispose of assets that would be subject to a 15 percent capital gains rate but certainly not the 45 percent estate tax.

Mr. Speaker, I yield 1 minute to the gentleman from Florida (Mr. Shaw).

Mr. Speaker, I am pleased to yield 3 minutes to the gentleman from the great State of Missouri (Mr. Blunt) a colleague of mine, the majority whip.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, among the many groups that support H.R. 8, including the National Federation of Independent Business, which is the voice of small business, there are many minority owners of small businesses that also support complete repeal.

Mr. Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. Bishop).

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I would remind the gentleman from Massachusetts (Mr. Neal) as he mentions Iraq and Afghanistan that the budgetary impact of H.R. 8 is really not felt until the year 2011 and beyond.

Mr. Speaker, I yield 2 minutes to the gentlewoman from Florida (Ms. Harris).

(Ms. HARRIS asked and was given permission to revise and extend her remarks.)

Mr. Speaker, I certainly respect my friend from Tennessee and I trust he will bring that passion to the floor when we have our discussion on our spending bills.

Mr. Speaker, I am pleased to yield 2 minutes to the gentleman from Texas (Mr. McCaul), a newly elected Member.

Mr. Speaker, I yield myself such time as he may consume to the gentleman from Alabama (Mr. Cramer), my cosponsor of H.R. 8.

Mr. Speaker, I yield 2 minutes to the gentleman from Missouri (Mr. Akin).

(Mr. AKIN asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield 2 minutes to the gentleman from Ohio (Mr. Turner).

Mr. Speaker, I yield 2 minutes to the gentleman from Virginia (Mr. Goode).

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, I appreciate in large measure the tone of the debate. What I would say to the gentlewoman who just spoke and to others who raised the red herring of Social Security is to remind folks, first of all, the Federal receipts from the Federal death tax represent less than 1.5 percent of all revenues, first of all; and, secondly, that none of the income tax money generated from the estate tax goes to Social Security for the trust funds, and eliminating the tax in no way will affect or impact current Social Security benefits. Not one bit.

Now, I do want to respond. I heard, I think, the gentleman from Massachusetts earlier say that really there has been no policy justification for keeping this tax, other than we need the money. In fact, I think one gentleman said something, from Massachusetts, about we need to pay our fair share.

Well, let me just ask you to consider your day. When you woke up this morning, if you hit the snooze button on your electric alarm clock, you are paying an electric tax. When you jumped into the shower this morning, you paid a water tax. If you saw the gentleman from North Dakota (Mr. Pomeroy) and I on C-SPAN debating this issue this morning, you are paying a cable TV tax. When you drove to work this morning, you are paying a gasoline tax. If you stopped for a cup of coffee, you paid a sales tax. If you used the telephone at all today, you are paying a telephone tax. And, of course, when you are at work, your wages are subject to a payroll tax that does go into Social Security, payroll taxes that do pay for Medicare, not to mention your income taxes. If you drive home to your home and you are lucky enough and fortunate enough to own a home, you are probably paying a local property tax.

When you kiss your spouse good night, you think that is free. No, leave it to the Federal Government to continue to have this thing called the marriage tax.

And, yes, if you scrape and invest and save and you build a family business, have the audacity to pursue the American dream, the Federal Government is there with its hand out saying give us 45 percent of the value of your family business.

Now I have heard from my colleagues on the other side who say that family farms are not affected. Well, then let me tell you a very quick personal story, a story of a farm family in Missouri, a young married couple who in 1956 left Portageville, Missouri, in the district of the gentlewoman from Missouri (Mrs. Emerson), with $1,000 in their pocket, and that was going to be the stake that they had. It happened that the woman was an expectant mother with her first child and, as it turned out, her only child.

That married couple happened to be my parents, and over the last 2\1/ 2\ years I have had the unfortunate reality that obviously death is inevitable, and I have had the unfortunate experience in our family of having both my father pass away in late 2002 and my mother one year ago.

I do not mind sharing with you, a 514 acre farm, a modest life insurance policy, the house that I grew up in, a combine, three tractors and some irrigation equipment, and that is it. And I am sitting across the mahogany desk from our long-time family accountant with the adding machine with a tape on it, and he is plugging in an arbitrary value for these assets that my parents invested their soul into. And I am breaking out into a cold sweat wondering whether or not this business that they built and wanted to pass on is going to fall above an arbitrary line or below an arbitrary line that we in Congress have set.

Now we did not have to pay the tax, but 14 days ago I had the requirement of filling out the form and paying the $2,000 accountant fee; and, again, I do not quarrel with that. But, Mr. Speaker, the death of a family member should not be a taxable event, period.

Mr. Speaker, I urge my colleagues to vote for H.R. 8.

Mr. Speaker, I claim the time in opposition.

Mr. Speaker, just a quick comment for whatever time I may consume before yielding to the gentleman from South Carolina (Mr. Barrett).

Did I hear the last speaker correctly, that we have given away, whose money is that? It would be the American taxpayers' money, who are probably, even as we speak, trying to grapple with those forms as they have tax day coming, as the income tax payers of America that provide for the comfortable living that he and I enjoy.

I yield to the gentleman from Maryland.

Mr. Speaker, I would say to my friend, and of course, as we have had a lot of unforeseen circumstances that have occurred, as was mentioned earlier, Iraq and Afghanistan. And let us hope and pray that as permanent repeal occurs, if it occurs, in the outyears that we will not be in that war on terrorism. But I would say to my friend, and I appreciate the question, but he also mentioned the Department of Agriculture, and lest, Mr. Speaker, anyone wonder who those agricultural groups are that represent farm families across America, I would place into the Record a letter from said groups.

In essence, the letter reads as follows: The groups listed below support permanent estate tax repeal, ask for this body to vote for H.R. 8, and the letter goes on to say, individuals and families own virtually all of the farms and ranches that dot America's rural landscape. Death taxes threaten the transfer of these operations to the next generation of food and fiber producers. Sincerely, Alabama Farmers Federation, American Farm Bureau Federation, American Sheep Industry Association, the American Soybean Association, Farm Credit Council, National Association of Wheat Growers; to my friend from North Dakota, National Cattlemen's Beef Association, National Corn Growers Association, National Cotton Council, National Grain Sorghum Producers, National Milk Producers Federation, National Potato Council, USA Rice Producers Federation, U.S. Rice Producers Association, and the Western Peanut Growers Association.

April 13, 2005.

House of Representatives,

Washington, DC.

Dear Representative: The groups listed below support

permanent estate tax repeal and ask you to vote for H.R. 8,

the Death Tax Repeal Permanency Act of 2005.

Individuals and families own virtually all of the farms and

ranches that dot America's rural landscape. Death taxes

threaten the transfer of these operations to the next

generation of food and fiber producers.

In 2001, Congress recognized the harm that death taxes

cause family businesses and voted to repeal this onerous tax.

Unfortunately, repeal scheduled for 2010 is temporary and

sunsets after only one year.

Congress should act now to make death tax repeal permanent.

Please show your support for permanent death tax repeal by

voting for H.R. 8 when the bill reaches the House floor this

week.

Sincerely,

Alabama Farmers Federation, American Farm Bureau

Federation, American Sheep Industry Association,

American Soybean Association, Farm Credit Council,

National Association of Wheat Growers, National

Cattlemen's Beef Association, National Corn Growers

Association, National Cotton Council, National Grain

Sorghum Producers, National Milk Producers Federation,

National Potato Council, USA Rice Federation, US Rice

Producers Association, Western Peanut Growers

Association.

Mr. Speaker, to my friend from South Carolina, I am not sure if any of those groups happen to represent farm families in his district, but I yield 2 minutes to the gentleman from South Carolina (Mr. Barrett).

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, the gentleman just indicated that the Pomeroy substitute solves the problem once and for all, and I have listened to a number of individuals on the other side during the course of this discussion that this is only going to affect the superwealthy and that really there are no family businesses that are affected by the estate tax. It has been interesting, because some of those comments have come from colleagues of mine on the Committee on Ways and Means.

Mr. Speaker, we have had a number of hearings going back to at least, from my memory, 1997. So I will mention some of these folks who have come and testified in front of the Committee on Ways and Means.

Martin Whalen testified about his family-owned and -operated company, Etline Foods Corporation, a distributor of food service products in York, Pennsylvania. When they purchased the business, 48 employees; in 1997, 105 employees. Rhetorically, I would say to my friend from North Dakota, will this solve their problem?

Wayne Nelson, a farmer from Winner, South Dakota. His father farmed until his father's death in 1993. Their estate planning was inadequate. Several parcels of land in South Dakota were liquidated in order to pay the Federal tax. Will the substitute rectify that situation?

What about Roger Hannay of Hannay Reels, Incorporated, a small manufacturer in the foothills of the Catskill Mountains about 25 miles from Albany, New York, a small manufacturer employing 150 employees?

What about Richard Forrestal, Jr., a principal in Cold Spring Construction, a firm specializing in highway and bridge construction?

What about Douglas Stinson, a tree farmer from Toledo, Washington, that runs the Cowlitz Ridge Tree Farm? Each of these testified, Mr. Speaker, that they were impacted negatively by the existence of the death tax.

What about Carol Loop, Jr., president of Luke's Nursery and Greenhouses, a wholesale plant nursery operation in Jacksonville, Florida? He started his business with a $1,500 loan and a borrowed truck. Would the problem be solved with the Pomeroy substitute?

Or Christopher and Kimberly Clements of Golden Eagle Distributors in Tucson, Arizona. They lost their father unexpectedly after a valiant bout with cancer. He lost his life at the age of 58.

Or Jeannine Mizell, a third-generation owner of Mizell Lumber and Hardware Company of Kensington, Maryland.

What about Robert Sakata, a vegetable farmer from Brighton, Colorado, or Jean Stinson, a railroad track manufacturing company in Barto, Florida, running the R. W. Summers Railroad Contractors? Their family had to shut down a facility in North Carolina, laying off two-thirds of the 110 employees to pay the estate tax.

Or Jack Cakebread, founder of Cakebread Cellars in Napa Valley, California. Would each of these individuals be solved or their estate problems solved by the substitute?

It is a rhetorical question, and the gentleman from North Dakota (Mr. Pomeroy) knows it, and I do not mean to put him on the spot, but he cannot answer the question because when we draw a line, an arbitrary line, wherever we draw that line, we still are going to have those entrepreneurs that have been willing to invest in their businesses, hire employees, build local communities; and as long as the death tax remains in existence, they are going to have to do some sort of estate planning.

I think it is much the better course to completely and finally permanently repeal the tax.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

As the gentleman from North Dakota recognizes; and, again, I do not think he meant to misspeak, but the underlying bill, H.R. 8, does provide a step up in basis of $3 million for the surviving spouse and a $1.3 million step up in basis for surviving heirs.

Mr. Speaker, many have worked on the death tax repeal and going back even to the, I think, Family Heritage Preservation Act of 1993. The gentleman from California introduced that bill and I think had 29 cosponsors. Now, of course, we are over 200 on permanent repeal.

Mr. Speaker, I yield 4\1/2\ minutes to the gentleman from California (Mr. Cox).

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, notwithstanding the gentleman's props, I would commend to him for his reading leisurely ``The Economics of the Estate Tax: An Update,'' a Joint Economic Committee study dated June 2003 which in essence states the estate tax raises very little, if any, net revenue because of distortionary effects of the estate resulting in income tax losses roughly the same size as the revenue collected. Secondly, estate taxes force the development of environmentally sensitive land. Through 2001, 2.6 million acres of forest land were harvested and 1.3 million acres were sold every year to raise funds to pay the estate tax.

Regarding his criticism on philanthropy, the estate tax according to the Joint Economic Committee study, the estate tax may actually be one of the greatest obstacles to charitable giving as estate taxes crowd out charitable bequests.

Mr. Speaker, I yield two minutes to the gentleman from Iowa (Mr. Latham).

Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from Georgia (Mr. Price).

Mr. Speaker, I have no further requests for time, and I can assure my friend I will not use the entire 14 minutes to close.

Mr. Speaker, who has the right to close?

Mr. Speaker, I yield 2 minutes to the gentlewoman from Washington (Miss McMorris), a newly elected Member from the State of Washington.

Miss McMORRIS. Mr. Speaker, I appreciate the opportunity to address the House today on this very important piece of legislation, the repeal of the death tax and making it permanent.

The repeal of the death tax is one of the first bills that I was honored to place my name on as a cosponsor.

Growing up on a family farm in eastern Washington, I have seen firsthand the negative impacts the death tax has on our families and our businesses.

One of my top priorities in Congress is to grow jobs and expand the economy in the Pacific Northwest.

I believe that the repeal of the death tax will help accomplish this goal, especially for the farmers and small businesses in my district.

The death tax costs thousands of jobs each year; and by repealing this unnecessary tax, jobs will be created and many small business owners will be able to add workers to their payrolls.

As a Member who represents a significant farming sector, I have seen the death tax destroy some family farms. Without a doubt, death taxes hurt our farmers and our ranchers by forcing family farms to sell land, buildings or equipment needed to operate their business in order to pay for this excessive tax. Some family farmers have had to take out a second mortgage on their home to pay for the tax.

When farms and ranches shut down, so do the businesses they support, leaving many out of work and leading to a depressed rural economy.

The time is now to end the death tax. I support the passage of H.R. 8 in order to end this unjust, unfair, and inefficient tax burden on our families, businesses and especially our farming communities.

Mr. Speaker, I yield myself the balance of the time.

Let me first say, Mr. Speaker, how much I appreciate my friend from North Dakota as we have done this in a number of sessions of Congress, and I appreciate the tone, and he is a friend of mine, and I have a lot of respect for him and the intent with which he comes to this debate.

Let me answer a couple of points that have been raised in particular, first of all, about the tax simplification. Tax day is 2 days away, and I am sure taxpayers, in particular small businesses and family farmers, would appreciate anything that we can do to simplify our tax laws, and I would submit that permanent repeal of the death tax does just that.

In fact, H.R. 8 is one simple paragraph, and it reads as follows: ``Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to title V of such Act.'' Basically, we repeal the sunset.

Now, again, the gentleman from North Dakota's (Mr. Pomeroy) substitute, I counted, and I hope I am counting correctly, but 40 subparagraphs and directing accountants and the like to this subparagraph or that particular paragraph.

The reason that we are here is because of complicated and arcane Senate budget rules, called the Byrd rule, that we phase out the death tax for one single year. In 2010, it magically disappears, and then on January 1 of 2011 it springs back to life, and the uncertainty, how would one as an estate planner advise a client when the tax is gone today and comes back again in the very next year? By making death tax repeal permanent, we give taxpayers the certainty they need to make those long-term financial decisions.

The form itself, the blank form I am holding here, Form 706, is 40 pages in length for the estate tax return, 40 pages in length, and it comes with a handy dandy 30-page instruction booklet. So when one is talking about simplification, what better simplification would there be than ripping these pages dealing with the estate tax completely out of the Internal Revenue Code?

Lastly, when it comes down to the nuts and bolts of it, whether or not the Pomeroy substitute, and again, in the effort to pursue the American dream, whether those businesses are going to be shielded by the Pomeroy substitute or not shielded, the fact is that as long as the tax is on the books, as long as Congress draws some line in the sand, and that is all we are doing with the substitute, is just some arbitrary line, we are still going to have those family businesses that are going to be taking some of their resources and these convoluted schemes, legal, but efforts to avoid the tax.

Again, we hear a lot about these very high-profile individuals who have been successful. I mean, this is the land of opportunity, is it not? I would submit to my colleagues that the billionaires and the top of the Fortune 500 lists, those folks have a stable full of lawyers and accountants to create this intricate estate plan to thwart the estate tax.

Not so, and I go back to the original discussion, that small family in Columbia, Missouri, the Eiffert family who spends $52,000 a year just to buy term life insurance because they might have to face the estate tax. Under the current law, or probably even under the gentleman from North Dakota's (Mr. Pomeroy) substitute, there is no certainty for families like the Eiffert family.

So I salute my colleague.

The gentleman from Illinois (Mr. Emanuel), again a colleague of mine on the Committee on Ways and Means, said, why are not we debating real reform? Interestingly, there is a lot of discussion. I am not here to advocate one particular tax reform proposal because we have got this blue ribbon panel that is happening and looking at various options. There is a lot of talk about the consumption tax, and yet it is notable that, while there may be support for the idea of a general consumption tax, the death tax, by contrast, is a tax on nonconsumption.

We talk a lot, too, about sin taxes. Why can we not put taxes on alcohol or on cigarettes and the like and whether or not that generates support among certain groups. This death tax is a tax on virtue. In other words, if you work hard, you play by the rules, if you scrape together your savings, and, again, we as an industrialized Nation, not only do we have even under the Pomeroy substitute a 47 percent death tax rate which would be the second highest in the world, but the fact is that we are not very good at savings and investments. In fact, if you are looking at your 1040 right now, look at line eight because it says if you have been thrifty and you are able to generate a little interest income, guess what, Uncle Sam says put this amount here because we are going to take our bite of the apple.

Permanent repeal of the death tax actually rewards virtue.

Let me just paraphrase a column recently, actually it was some years ago

but I think republished recently by Professor Edward J. McCaffery. He is a professor who says this: ``As a committed liberal myself, I used to believe that the gift and estate tax was essential to a just society. But as a former estate planner and a scholar in both law and economics, I confess that I was mistaken. The gift and estate tax is quite simply a bad tax, even, and maybe especially, when viewed from a liberal perspective.''

Professor McCaffrey goes on and says, ``This is not a supply-side argument but a moral one. People who die with large amounts of wealth have done three good things for society. They have exercised their talents, rather than living a life of leisure. They have saved, contributing to a common pool of capital whose benefits manifest, for example, in lower interest rates, inure to all. And they have refrained from spending all of their wealth on themselves.''

In fact, Professor McCaffrey across the Capitol some years ago I think before the Senate Finance Committee said, to paraphrase Scripture, the reason he changed his mind, I was blind but now I see.

If this comes from an unrequited liberal that the estate tax, the death tax, is a bad tax, then I would suggest to all of my colleagues here that it is time to permanently and completely repeal the tax.

Finally, I would say to my friend again, because there has been some discussion about creating a new tax, as the gentleman knows, the intent of H.R. 8, the underlying bill, is to help make it easier to pass a family business from one generation to the next. As we have heard from nonpartisan groups, 70 percent of family businesses do not make it to a second generation, 87 percent of family businesses do not make it to a third generation, and often the reason cited is because of this very confiscatory punitive tax called the death tax.

The fact is that under H.R. 8, if it were to pass and become the law of the land, the tax rate imposed at death on a lifetime of work and thrift is zero percent. Under my friend's substitute amendment, the rate imposed would be locked in at 47 percent.

Now I mentioned my personal experience, and I am running our family farm. If a surviving heir chooses not to farm and then makes the conscious decision to dispose of assets, then that is a taxable event, but that is a purposeful decision made by the heirs of that family business owner. It is not the Federal Government requiring the death of a family member to be a taxable event.

So I would simply say to all of my colleagues that death should not be a taxable event, period. Under the underlying bill of H.R. 8, it would no longer be a taxable event. Under the substitute from my friend, individuals above an arbitrary line drawn by this body, death would continue to be an event that triggers the Federal death tax. That is why prominent organizations such as the Chamber of Commerce, National Federation of Independent Business, American Farm Bureau Federation and a host of other small business coalition members, representing the interest of small businesses and family farms across the country, support H.R. 8 and oppose my friend from North Dakota's substitute.

I urge a ``no'' on the substitute and a ``yes'' on the underlying bill.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

(Mr. McGOVERN asked and was given permission to revise and extend his remarks.)

Mr. Speaker, for years the Republican leadership has misled the American public about the estate tax. Today, because of that deceptive campaign, millions of Americans seem to believe they will be subject to the so-called death tax. They have been lied to.

Facts are stubborn things, and the facts prove that the Republican leadership is once again trying to pass a bill that helps the very wealthy few at the expense of everyone else.

The truth is that the overwhelming majority of American families, 99.7 percent, are not subject to estate taxes. Let me repeat: 99.7 percent of American families are not subject to estate taxes.

The truth is that this is the wrong bill at the wrong time that helps the wrong people, and it should be defeated. This permanent repeal of the estate tax does not help the average American. Instead, it benefits the heirs of the wealthy. Paris Hilton is doing just fine. She does not need another tax cut by the Republicans.

My colleague, the gentleman from Washington (Mr. Hastings), will claim that this bill will help family farmers and small business owners pass their assets, their farms and businesses, on to their children. The reality is that most of these family farmers and small business owners are already exempt from the estate tax.

Further, as The Washington Post pointed out today, permanently repealing the estate tax may actually hurt more family farmers and small businesses than it would help because of the cumbersome new reporting requirements and changes in how assets are valued.

Let us look at the facts. Exempting estates up to $1 million, the original level before the 2001 Bush tax cut, leaves only the top 2 percent of the estates in the country. But current law goes well beyond the $1 million exemption; and to hide the real cost of their bad economic policies, the Republican leadership included a provision that sunsets the 2001 tax cut in 2011.

Mr. Speaker, for most of the 20th century, this country operated on a progressive taxation system. Those who could afford it paid their fair share. We looked out for each other. We provided food to the hungry, shelter to the homeless, assistance to the unemployed, and health care to the sick.

But the Republican leadership wants to turn that system upside down. They believe the wealthy should be exempt from paying taxes and the poor should fend for themselves. It is wrong, and we have to stop it.

Let me connect the dots for my Republican friends. They say there is a deficit and we need to tighten our belts to pay down the debt. Of course this debt is of their creation. President Bush came into his first term with a surplus and ended his second term with the largest deficit in the history of the United States of America, and now they bring forward another tax cut that costs $290 billion according to the Joint Committee on Taxation.

Some private groups estimate that this bill will ultimately cost closer to $1 trillion.

Where is that money going to come from? It is a credit card bill that they are passing on to our children and our grandchildren. That is the actual estate tax. That is the real legacy they are leaving to future generations.

Mr. Speaker, we are at war, but the only people being asked to sacrifice are those who can least afford it. The wealthiest of the wealthy are getting a free ride at this very difficult time in our history.

Look at the budget resolution. The Republican leadership pushed the budget resolution through earlier this month. What do they do? They cut food stamps. They cut Medicaid. They cut education programs. They cut environmental protection. They cut community development block grants. They cut school breakfasts and school lunches. Why? All so a few people can inherit a few more billion dollars tax free from their relatives.

Our colleague from North Dakota (Mr. Pomeroy) will offer an amendment that will set the exemption for estates at $3 million for individuals and $7 million for couples. This would cost dramatically less than the Republican bill, $72 billion compared to $290 billion, and it would exempt 99.7 percent of all estates from ever facing the estate tax. This is a commonsense compromise that should receive near unanimous support.

Mr. Speaker, the truth is out there, but the Republican leadership is too stubborn and too arrogant to face it. We are at war. Health care costs are spiraling out of control. Poverty in America is increasing. More Americans go to bed hungry at night. Our children are falling behind in math and science. I, for one, do not believe the answer to these challenges is a permanent repeal of the estate tax.

I urge my colleagues to do the right thing and defeat this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

We hear the phrase ``death tax,'' which really is kind of a misnomer. There is no such thing. When I am dead, I am dead. You cannot collect any taxes from me. The issue is whether or not estates in the billions of dollars should be subject to any taxation. We are not talking about small family farms or small businesses. That is not what this is about. If you read the Washington Post today, it is very clear what this is about. It is about the most extremely wealthy companies, the most extremely wealthy people in this country.

The gentleman from North Dakota has a substitute that would basically exempt 99.7 percent of all estates from any estate tax. So let us be clear about what is going on, and let us also be clear about the cost to our kids. The Joint Committee on Taxation says that this is going to cost up to $290 billion. There seems to be no concern on the other side of the aisle about what this does to our deficit or our debt. This is not paid for. They make no attempt to pay for it.

Let me just remind my colleagues that the debt that we are faced with right now is close to $8 trillion, and the interest on that debt is astonishingly high. That is the legacy that they are passing on to our kids.

Our good colleague from Tennessee (Mr. Tanner) in a presentation, I thought, said it best. He said, so people can understand what the debt means, if you stack up one thousand dollar bills, a million dollars would be about a foot high; a billion dollars would be about the size of the Empire State Building; a trillion dollars would be 1,000 Empire State Buildings. Our debt is close to $8 trillion, and there is no outrage on the other side, there is no concern about what we are doing and what it means to our economy by making these tax cuts permanent.

I think that people need to understand what is going on here. This is not about small family farms. It is not about small businesses. This is about helping the wealthiest of the wealthy.

Mr. Speaker, I yield 6 minutes to the gentleman from North Dakota (Mr. Pomeroy).

Mr. Speaker, I yield myself such time as I may consume.

Let me again remind people that we are talking about three-tenths of 1 percent who actually pay an estate tax. In that category we are not talking about family farms or small businesses. We are talking about Paris Hilton, and I would say to my colleague from California that I think she has enough accountants and lawyers to be able to fill out form 706.

Mr. Speaker, I yield 3 minutes to the gentleman from Vermont (Mr. Sanders).

Mr. Speaker, I yield myself such time as I may consume.

Let me just make a couple of points here. This is not about protecting small businesses or family farms. I mean, I think that is clear to everybody here. This is about protecting the three-tenths of the 1 percent wealthiest people in this country.

I enter into the Record an article that appeared in today's Washington Post that really kind of explains what this debate is all about, about how Mars candy, Gallo wine, and Campbell soup fortunes have been lobbying for the complete repeal of the estate tax for some time so they can end all taxation on their inheritance. That is what this is about. This is not about working families. This is not small family farms or small businesses. This is about protecting the richest of the rich.

[From the Washington Post, April 13, 2005]

Erosion of Estate Tax Is a Session in Politics

(By Jonathan Weisman)

In 1992, when heirs to the Mars Inc. fortune joined a few

other wealthy families to hire the law firm Patton Boggs LLP

to lobby for estate tax repeal, the joke on K Street was that

few Washington sightseers had paid so much for a fruitless

tour of the Capitol.

Today, the House is expected to vote to permanently repeal

the estate tax, moving the Mars candy, Gallo wine and

Campbell soup fortunes one step closer to a goal that once

seemed quixotic at best: ending all taxation on inheritances.

``I think this train has an awful lot of momentum,'' said

Yale University law professor Michael J. Graetz, a former

senior official in the Treasury Department of President

George H.W. Bush.

Last month, Graetz and Yale political scientist Ian Shapiro

published ``Death By A Thousand Cuts,'' chronicling the

estate tax repeal movement as ``a mystery about politics and

persuasion.''

``For almost a century, the estate tax affected only the

richest 1 or 2 percent of citizens, encouraged charity, and

placed no burden on the vast majority of Americans,'' they

wrote. ``A law that constituted the blandest kind of common

sense for most of the twentieth century was transformed, in

the space of little more than a decade, into the supposed

enemy of hardworking citizens all over this country.''

The secret of the repeal movement's success has been its

appeal to principle over economics. While repeal opponents

bellowed that only the richest of the rich would ever pay the

estate tax, proponents appealed to Americans' sense of

fairness, that individuals have the natural right to pass on

their wealth to their children.

The most recent Internal Revenue Service data back

opponents' claims. In 2001, out of 2,363,100 total adult

deaths, only 49,911--2.1 percent--had estates large enough to

be hit by the estate tax. That was down from 2.3 percent in

1999. The value of the taxed estates in 2001 averaged nearly

$2.7 million.

Congressional action since 2001 will likely bring down the

number of taxable estates still further. President Bush's 10-

year, $1.35 trillion tax cut in 2001 began a decade-long

phase-out of the estate tax. The portion of an estate

exempted from taxation was raised from $675,000 in 2001 to

$1.5 million in 2004. Next year, the exemption will rise to

$2 million for individuals and $4 million for couples.

The impact has been clear, tax policy analysts say. The

number of estates filing tax return is falling sharply, from

123,600 in 2000 to an expected 63,800 this year. And only a

small fraction of those will actually be taxed.

Under the 2001 legislation, however, all of the tax cuts,

including the estate tax's repeal, would be rescinded in

2011. The vote today is the first to address the sunset

provisions.

House Democrats, led by Rep. Earl Pomeroy (D-N.D.), today

will propose permanently raising the exclusion to $3.5

million--$7 million for couples. That would be enough to

exempt 99.7 percent of all estates. The Pomeroy bill would

cost the Treasury $72 billion over 10 years, compared with

the $290 billion price tag of a full repeal through 2015,

according to the Joint Committee on Taxation.

``The ideological fervor that is admittedly still pretty

strong in some quarters is now being tempered by the runaway

debt that is weighing down this country,'' said Pomeroy, who

thinks voters are ready for a compromise.

Indeed, Senate Majority Leader Bill Frist (R-Tenn.) has

asked Sen. Jon Kyl (R-Ariz.), a repeal proponent, to find a

compromise that could win a filibuster-proof 60 votes in the

Senate this year, even if it falls short of full repeal.

A compromise that includes any estate tax, no matter how

small, may fail if the fervent repeal coalition holds firm,

Graetz said. Repeal opponents have been unable to whip up big

support, he said, because they never made the emotional case

that the American

belief in equal opportunity runs counter to the existence of

an aristocracy born to inherited riches. Paris Hilton, who

inherited her wealth. and now famously enjoys spending it,

could have been their counter to the small-business owners

and family farmers whom repeal proponents held up as the

victims of the tax.

``The public doesn't believe people should be taxed at the

time of death, whether they are paupers or billionaires,''

said Frank Luntz, a Republican pollster who has been working

on estate tax repeal for a decade. ``Compromise is very

difficult because the public doesn't want it to exist.''

It is that sentiment that the fledgling repeal forces

tapped into when they mobilized more than a decade ago. A

little-known Southern California estate planner named

Patricia Soldano launched her repeal effort with the backing

of about 50 wealthy clients, with the Gallo and Mars families

leading the way. Other contributors included the heirs of the

Campbell soup and Krystal hamburger fortunes. Frank Blethen,

whose family controls the Seattle Times Co., was also

pivotal.

The effort caught fire when small-business groups such as

the National Federation of Independent Business and

agriculture groups led by the National Cattlemen's Beef

Association joined in.

By 1994, Newt Gingrich's Republican insurgents had latched

onto the estate tax issue, but the Contract With America

called for an estate tax reduction, not repeal. In 1995,

Luntz poll-tested the term ``death tax'' and advised the new

GOP majority to never use the terms ``inheritance'' or

``estate tax'' again.

By then, Soldano's Policy and Taxation Group was spending

more than $250,000 a year on lobbying. A parade of small-

business owners and family farmers appealed to their

congressmen, worried that they could not pass on their

enterprises to their children, even though most of them would

not be affected by the tax.

``There's been a sustained, determined campaign of

misinformation that in the end has left the American people

with a very different notion of what the estate tax is and

does than actually exists,'' Pomeroy said.

But ultimately, whether people believe the estate tax will

affect them has little bearing on support for repeal. Early

this year, with Soldano's money, Luntz again began polling,

this time in the face of record budget deficits and lingering

economic unease. More than 80 percent called the taxation of

inheritances ``extreme.'' About 64 percent said they favored

``death tax'' repeal. Support fell to a still-strong 56

percent when asked whether they favored repeal, even if it

temporarily boosted the budget deficit.

Democrats ``still don't get it,'' Graetz said. ``The

politics are still very powerful.''

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I appreciate the words from my colleague on the Committee on Rules, the gentleman from Florida; but quite frankly, I do not know what he is talking about. The small businesses and the family farms, we are all in agreement that they need to be protected. That is not what the debate is about here today.

The debate is about whether three-tenths of 1 percent of higher income-earners in this country deserve additional tax relief at a time when they are cutting Medicaid, veterans benefits, when they are dipping into the Social Security trust fund.

This is not a death tax. What they are talking about is a debt tax, D-E-B-T, adding to the deficits and the debt of this country. Right now, this year, we are paying $177 billion this year in interest on the debt. Next year it will be $213 billion. It is ridiculous. We need to rein in some of these extravagant tax cuts for the wealthy so that we can get our fiscal house in order here in this country, so we can start taking care of Social Security in the long term, so we do not have to cut veterans benefits or educational benefits or environmental protection.

Mr. Speaker, I at this time I will enter into the Record an article by E.J. Dionne entitled ``The Paris Hilton Tax Cut.''

[From the Washington Post, Apr. 12, 2005]

The Paris Hilton Tax Cut

(By E. J. Dionne Jr.)

The same people who insist that critics of Social Security

privatization should offer reform proposals of their own are

working feverishly to eliminate alternatives that might

reduce the need for benefit cuts or payroll tax increases.

I refer to the fact that House Republican leaders have

scheduled a vote this week to abolish the estate tax

permanently. Under a wacky provision of the 2001 tax cut

designed to disguise the law's full cost, Congress voted to

make the estate tax go away in 2010, but come back in full

force in 2011.

With so many other taxes around, it's hard to understand

why this is the one Congress would repeal. It falls, in

effect, on the heirs to the wealthiest Americans. Fewer than

1 percent of the people who died in 2004 paid an estate tax,

and half the revenue from the tax came from estates valued at

$10 million or more.

Yet, because the wealthy have gotten wealthier over the

past three decades or so, the estate tax produces a lot of

money. Counting both revenue losses and added interest costs,

complete repeal of the estate tax would cost the government

close to $1 trillion between 2012 and 2021, according to the

Center on Budget and Policy Priorities.

And that is where Social Security comes in. You can reject

outlandish claims that Social Security faces some sort of

``crisis'' and still acknowledge that it faces a gap in

funding for the long haul. The estate tax should be part of

the solution.

In a little-noticed estimate confirmed by his office

yesterday, Stephen Goss, the highly respected Social Security

actuary, has studied how much of the Social Security

financing gap could be filled by a reformed estate tax. What

would happen if, instead of repealing the tax, Congress left

it in place at a

45 percent rate, and only on fortunes that exceeded $3.5

million--which would be $7 million for couples? That, by the

way, is well below where the estate tax stood when President

Bush took office and would eliminate more than 99 percent of

estates from the tax. It reflects the substantial reduction

that would take effect in 2009 under Bush's tax plan.

According to Goss, a tax at that level would cover one-

quarter of the 75-year Social Security shortfall. The

Congressional Budget Office has a more modest estimate of the

shortfall. Applying Goss's numbers means that if CBO is

right, the reformed estate tax would cover one-half of the

Social Security shortfall.

This is big news for the Social Security debate. Michael J.

Graetz and Ian Shapiro, authors of a new book on the estate

tax, ``Death by a Thousand Cuts,'' have referred to its

repeal as the ``Paris Hilton Benefit Act.'' To pick up on the

metaphor, why should Congress be more concerned about

protecting Paris Hilton's inheritance than grandma's Social

Security check? How can a member of Congress even think about

raising payroll taxes while throwing away so much other

revenue?

This also means that Democrats now talking about reaching a

``compromise'' with the Republicans on the estate tax should

put the discussions on hold until the Social Security debate

plays itself out. Most of the ``compromises'' being discussed

would repeal 80 to 90 percent of the estate tax. At some

point, it might be reasonable to agree to make the 2009

estate tax levels permanent. But if they agree to any steps

beyond that, Democrats will, once again, be placing the

concerns of wealthy donors over the interests of the people

who actually vote for them.

The Friends of Paris Hilton realize that as federal

deficits mount and rising Medicare costs loom, the case for

the total repeal of the estate tax grows steadily weaker.

That's why they're hoping they can sucker defenders of estate

taxes into a so-called compromise that gives away the store--

the store, in this case, going to Neiman-Marcus shoppers, not

to those who rely on Target.

This is an instructive moment. What we are having is not a

real debate on the future of Social Security but a sham

discussion in which the one issue that matters to the

governing majority is how to keep cutting taxes on the

wealthiest people in our country.

Those who vote to repeal the estate tax this week will be

sending a clear message: They see the ``crisis'' in Social

Security as serious enough to justify benefit cuts and

private accounts. But it's not serious enough to warrant a

minor inconvenience to those who plan to live on their

parents' wealth.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Again, I am having trouble following this debate here. The gentlewoman from Tennessee talked about the thousands of people in her district that had to pay the estate tax last year. I am reading from a report here that said there were roughly 440 taxable estates, or about 2 percent of all taxable estates were made up of farm and business assets in the year 2004.

What we are talking about here, and again, if we agree to the Pomeroy substitute, is three-tenths of 1 percent of the wealthiest people in this country. That is what we are talking about. We are not talking about family farms. I mean, that is a red herring. We are not talking about small businesses. We are talking about the Campbell Soup fortunes, the Mars candy fortunes. We are talking about the richest of the rich. That is what this is about.

What is unconscionable is that we are moving forward on this at a time when the majority of this House is proposing budgets that slash Medicaid, that cut community development block grants, that cut veterans health benefits, that cut education, that cut things that people rely on every single day. This is absurd that we are having this debate here today.

Again, I would urge my colleagues to look at the facts. Please do not exaggerate the impact of the difference between what the gentleman from North Dakota (Mr. Pomeroy) has suggested and what you are proposing here. What you are doing here is trying to extend this to protect the richest of the rich, and that is just wrong.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I want to make it clear, as there is a lot of misinformation being promoted on the other side here: our side supports relief for family farmers and small businesses. That is not what we are talking about here today. The difference between our approach is the three-tenths of 1 percent richest people in this country, the Paris Hiltons of the world, the executives at Campbell Soup, the heirs of Campbell Soup or Mars candy if you read The Washington Post today. That is what this is about. In a climate where the majority is cutting Medicaid, cutting veterans benefits, cutting programs that help feed the most vulnerable in our country, to go out and protect and to try to extend a special tax cut to those richest people in this country, I think, is unconscionable.

Mr. Speaker, I yield 3 minutes to the gentleman from North Dakota (Mr. Pomeroy).

Mr. Speaker, I yield myself such time as I may consume.

Let me again, just for the record, point out that the Pomeroy substitute would provide $3 million in relief for individuals immediately, $3.5 million by 2009, and $7 million per couple. And, again, what we are talking about here is not what the gentleman just spoke of. What we are talking about here is the richest of the rich in this country.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 3 minutes to the gentleman from Virginia (Mr. Moran).

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, what the majority is doing today is wrong. We need to help family farmers and small businesses. We all agree on that, and the substitute that the gentleman from North Dakota (Mr. Pomeroy) puts forth does that, with very generous exemptions.

But what the majority is suggesting is that somehow we need to do something to help the three-tenths of 1 percent of the richest people in this country at a time when they present budgets that cut Medicaid, that cut veterans benefits, that cut educational programs, that cut programs for the poor.

I mean, what are you doing? How can you come here with a straight face and say that we need to help the three-tenths of 1 percent richest people in this country, when so many people who are struggling in the middle class, so many struggling to get in the middle class, are having such a difficult time?

This is wrong what you are doing.

Mr. Speaker, at the end of this debate, I will call for a vote on the previous question; and if the previous question is defeated I will offer an amendment to the rule.

My amendment would take the cost difference between the Republicans' estate tax cut bill, which cost $290 billion, and the Pomeroy estate tax cut bill, which costs $72 billion, and shift that difference to the Social Security trust fund. We are talking about $218 billion that could go right into the Social Security trust fund.

The Republican leadership and President Bush claim that there is a Social Security crisis. If they truly believe that there is a crisis, they should step up to the plate and support this effort to shore up the Social Security trust fund now.

The Pomeroy substitute will exempt 99.7 percent of all estates. 99.7 percent. With this amendment we can restore $218 billion back to the Social Security trust fund and help save Social Security for future generations.

Mr. Speaker, there are a lot of people on the other side of the aisle who go back home and do town hall meetings and tell their constituents that they are for protecting Social Security. Well, this is a vote to show that you want to protect Social Security.

Mr. Speaker, I ask unanimous consent to insert the text of the amendment immediately prior to the vote on the previous question.

Again, Mr. Speaker, I would urge that the people join with us on this vote.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, Benjamin Franklin noted over 200 years ago that ``in this world nothing can be said to be certain, except death and taxes.'' Unfortunately, the convergence of these two inescapable events, in the form of the Federal estate tax, results in a number of destructive outcomes in terms of slower economic growth, reduced social mobility, and wasted productive activity. Moreover, the costs imposed by the estate tax far outweigh any benefits that the tax might produce. For these reasons, among others, I urge my colleagues to join with me in support of permanent repeal of the Federal estate tax.

The estate tax has been enacted four times in our Nation's history-- each time in response to the exigent financial straits deriving from war. In three of those instances (1797-1802,1862-70, and 1898-1902), the estate tax was repealed shortly thereafter. Most recently, the estate tax was reintroduced during World War I (1916) and has existed ever since. What was meant to bring short-term budgetary relief has become a permanent burden on America's farmers, small business owners and families.

Some observers might believe that the estate tax is free from serious controversy. For example, it is often claimed that the tax only falls on the ``rich'' and thus serves to reduce income inequality. Other supporters of the estate tax point to the $22 billion in tax revenues for 2003, or to the incentive for charitable bequests. Nonetheless, there are many reasons to question the value of taxing the accumulated savings of productive, entrepreneurial citizens. Not the least of these reasons is the widely-held belief that families who work hard and accumulate savings should not be punished for sound budgeting. Additionally, it is unclear whether the estate tax raises any revenue at all, since most if not all of its receipts are offset by losses under the income tax.

The freedom to attain prosperity and accumulate wealth is the basis of the ``American dream.'' We are taught that through hard work we can achieve that dream and, God willing, pass it on to our children. Unfortunately, for many the estate tax turns that dream into a nightmare. The current tax treatment of a person's life accumulations is so onerous that when one dies, the children are often forced to turn over half of their inheritance to the Federal Government. The estate tax, which is imposed at an alarming 45 to 47 percent rate, is higher than in any other industrialized nation in the world except Japan. Thus, many families must watch their loved one's legacy being snatched away by the Federal Government at an agonizing time. This is tragically wrong and nullifies the hard work of those who have passed on.

In the minority community there are numerous examples of the injurious effects of the estate tax. The Chicago Daily Defender--the oldest African American-owned daily newspaper in the United States--is a good example of the unique problem presented for minority families. It was forced into bankruptcy due to financial burdens imposed by the estate tax. But, beyond that, the questions were--was the Chicago Defender family forced to sell, could a minority owner be found to purchase it, or would it become a white-owned asset, reducing the overall wealth of the African American community?

On a smaller scale, another potential victim, a storeowner named Leonard L. Harris who is a first generation owner of Chatham Food Center on the South Side of Chicago is frightened that all the work and value he has put into his business will be for naught because it will be stripped from his two sons. According to Mr. Harris, ``My focus has been putting my earnings back into growing the business. For this reason, cash resources to pay federal estate taxes, based on the way valuation is made, would force my family to sell the store in order to pay the IRS within 9 months of my death. Our yearly earnings would not cover the payment of such a high tax. I should know. I started my career as a CPA.'' These two stories are not isolated.

According to the Life Insurance Marketing Research Association, less than half of all family-owned businesses survive the death of a founder and only about 5 percent survive to the third generation.

Another recent study found the following:

Eight out of ten minority business owners questioned believe the Federal estate tax is unfair.

Only one minority business owner in three has been able to take any steps whatsoever to prepare for the ramifications of the estate tax.

One in four believes that his or her heirs will be forced to sell off at least part of their businesses to pay the estate tax liability.

Fully half the respondents already know a minority-owned business that has had trouble paying the tax, including some that have been forced to liquidate.

Those few minority-owned businesses that have been able to take steps to reduce their estate tax liability complain that it has detracted from their ability to meet business objectives by channeling time, energy and resources away from productive endeavors.

Many of my colleagues who are proponents of the estate tax contend that the tax adds progressivity to the Tax Code and provides needed tax revenue. They argue that the estate tax falls on wealthier and higher income individuals and increases the total tax paid by this segment of the population relative to their income. This helps offset the regressivity of payroll taxes and excise taxes, which fall more heavily on low-income groups relative to their income. They also argue that increasing the unified credit to $4, $5, $6 or $7 million would remove small family-owned businesses and farms from the harsh impact of the estate tax.

I share my colleagues concerns about protecting the tax base and ensuring that our Tax Code remains progressive. However, I find these arguments in support of the estate tax unconvincing in the face of substantial evidence otherwise.

First, there is no clear evidence that the estate tax is progressive or that larger estates are paying a greater portion of the tax. Wealthier members of our society are able to reduce and or eliminate the impact of the estate tax by stuffing money away here and there at the suggestion of high-priced attorneys and accountants. Similarly, tax planning techniques such as gift tax exclusions or valuation discounts reduce the size of the gross estate but do not appear in the IRS data causing effective tax rates to be overstated for many larger estates. The Institute for Policy Innovation recently revealed evidence of this fact in a study showing that the effective tax rate on the most valuable estates was actually lower than that on medium-sized estates.

Second, the insignificant amount of money the estate tax raises for the Federal Government cannot justify the harmful effects it has on business owners who spend more to avoid

the tax than the federal tax revenue raised. According to the President's fiscal year 2005 Budget, the estate and gift tax brought in $22.8 billion in revenues to the Federal Government in 2003. This represents less than 1.1 percent of the total revenues out of a more than $2 trillion Federal budget and less than the amount of money spent complying with, or trying to circumvent, the death tax.

In 2003, Congress' Joint Economic Committee reported that the death tax brought in $22 billion in annual revenue, but cost the private sector another $22 billion in compliance costs. Therefore, the total impact on the economy was a staggering $44 billion. And, when one calculates the amount of money spent on complying with the tax, the number of lost jobs resulting from businesses being sold, or the resources directed away from business expansion and into estate planning, it is clear why this punitive tax must be eliminated.

It is also important to note that many economists believe that overall tax revenues would increase if the estate tax were repealed. According to a study of estate tax repeal proposals, which was prepared by Dr. Allen Sinai for American Council for Capital Formation and Center for Policy Research, Federal tax receipts would rise in response to a stronger economy, feeding back 20 cents of every dollar of estate tax reduction. In fact, over the years 2001 to 2008, estate tax repeal would increase real Gross Domestic Product by $90 billion to $150 billion, and U.S. employment by 80,000 to 165,000.

Finally, it is not clear that increasing the unified credit to $6 or $7 million would remove small family-owned businesses and farms from the threat of the estate tax. The Small Business Administration's definition of a small business is based on industry size standards. For example, a construction company or grocery store with less than $27.5 million in annual receipts is considered a small business. Thus, families who build their businesses past the exemption amount will continue to face estate taxes that range from the aforementioned, alarming rate of 45 to 47 percent. The exemption threshold would not help these small businesses. More significantly, without significant reform or, more appropriately, repeal, these same small businesses face the prospect of estate tax rates as high as 60 percent beginning in 2011.

Permanent repeal of the estate tax will provide American families with fairness in our tax system and remove the perverse incentive that makes it is cheaper for an individual to sell the business prior to death and pay the individual capital gains rate than pass it on to heirs. But for minorities, it provides much more. It will allow wealth created in one generation to be passed on to the next thereby establishing sustainable minority communities through better jobs and education, better healthcare, and safer communities.

Mr. Speaker, I urge my colleagues to support H.R. 8 to permanently repeal the Federal estate tax and to restore fairness to our Nation's Tax Code.

Mr. Speaker, pursuant to H. Res. 202, I offer an amendment in the nature of a substitute.

Mr. Speaker, I am pleased to begin the presentation of the amendment in the nature of a substitute by yielding such time as he may consume to the distinguished gentleman from Maryland (Mr. Hoyer), the minority whip.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 4 minutes to the gentleman from Oregon (Mr. Blumenauer), the other member of the Earl Caucus of this House.

Mr. Speaker, I yield myself 5 minutes.

Mr. Speaker, it is a privilege to carry this debate today on behalf of the minority, and a privilege to participate with the gentleman from Missouri, who is one of my favorite Members of the House. He has presented his side very well.

He asked relative to a number of estates, would they be covered under the Pomeroy substitute? Well, I believe that a number of them would have their estate tax problems completely eliminated, because we take the exemption and we double it. We go from today, a joint estate at $3 million, and we say, if you have a joint estate of $6 million, no estate tax. We, like 2009, take that up to $7 million in a joint estate circumstance.

So as to the question he asked, I do not know the particulars of those cases, but I expect that a number, if not all of them are covered, because 99.7 percent of the estates in this country are under that amount.

But there is a feature of the majority proposal that is not represented in our substitute, and I want to talk about it right now, and this involves the imposition of capital gains liability at the handling of an estate under the majority bill.

I can just imagine Members in the majority, some of them that might have signed that ``no new tax'' pledge that was going around last Congress, just wringing their hands because they are about to vote for a tax increase, a tax increase in the form of capital gains taxation on estates. Section 541 of the bill that the majority proposal would make permanent reads this way: termination of step-up in basis at death. Tax legalese, but what does it mean? It means new capital gains and capital gains if you have an estate that exceeds that 1.3 gross value. You have a reporting commitment that attaches at 1.3 gross value for estate.

You know, it is the darndest tax bill I ever saw. Because, while they talk about tax relief, they are hurting more than they are helping.

I direct you to this chart. Number of estates today with capital gains issue, zero; and that is because the taxable basis in the property is established at time of transfer in an estate. No capital gains.

What happens under their proposal? Well, we know that there are 71,000 estates in the year 2011 that are likely to have reportable amounts, in other words, gross valuation over $1.3 million. Some will have a capital gains issue they have to pay. Some will not. But they are all going to have to report with the IRS.

And this report is something else. It means going back in and trying to establish what the value of the property was at the time mom and dad acquired it. It is a nightmare. And that is well-established in the Congressional Record. Because I have here the hearing, I have here the Ways and Means record at the time the committee considered testimony to repeal the carryover basis, the very provision they want to re- establish in tax law.

You see, it passed once before, in 1976. It was delayed from implementation and then repealed retroactively because of its consequences.

Here is what some very interesting participants had to bring to the committee. Carryover basis fosters an insidious bias against farmers and ranchers. Carryover basis calculations for

land, buildings, machinery, livestock and timber have been described as, at best, potential nightmares. Trying to establish what the taxable basis on this is, which their law would require, is a nightmare. So says the American Farm Bureau in their 1979 testimony.

The Cattlemen's Association, one touted as one of these that want to re-establish capital gains on estates, they say, because of its complexity, carryover base is impossible to comply with. It will increase the tax burden and compound the illiquidity of estates of farmers, ranchers and other family business operators who sell inherited property in the normal course of business, and I quote, and find it in the record from the National Cattlemen's Association.

NFIB also states, I strongly urge you, as an individual and as a taxpayer and as one who professionally and through an association represents small business people, repeal the carryover basis. So says the National Federation of Independent Business, the very group that they have cited as trying to re-establish carryover basis in the Tax Code and put capital gains back on estates.

We have been here before. We do not want to do it again. Do you not understand, voting for the repeal bill brings a new bill, a capital gains bill, and a capital gains bill to thousands that have no estate tax consequence?

So if you want to cast a vote this afternoon for a tax relief proposal, vote the Pomeroy substitute. No capital gains in the Pomeroy substitute.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself 90 seconds.

You know, anyone in the accountant or tax-planning profession worrying about losing business because of the estate tax is going to be smiling broadly at the end of tonight when we pass this re-creation of capital gains tax and estates.

In fact, the ABA Task Force report devotes almost 70 pages to discussing the problems that exist with the new carryover basis rules in their legislation. The problems identified in the report include unequal treatment of capital losses, difficulty in applying basis adjustments to property sold during the administration of the estate, treatment of property with debt and excessive basis, treatment of installment loans, unequal treatment of pension assets, administrative problems with allocation to spousal property, discrimination in favor of spouses in community property states. Even a cursory examination of that report leads to a conclusion that serious problems exist with the new rules and that their surface simplicity is quite misleading.

Let us just walk through some of the titles, some of the titles of the new capital gains law that they are going to have: Basis increase for certain property; limit increased by unused built-in losses and carryovers; spousal property basis increases; qualified terminable interest property; definitions and special rules for application of subsections (b) and (c); fair market value limitation; coordination with Section 691; information returns, et cetera.

And to think that for every one taxpayer getting relief under their proposal, an additional ten are now going to face this nightmare. It is a funny way to give tax relief.

Mr. Speaker, I yield 4 minutes to the gentleman from California (Mr. Sherman).

Mr. Speaker, I yield 3 minutes to the gentleman from Tennessee (Mr. Davis).

(Mr. DAVIS of Tennessee asked and was given permission to revise and extend his remarks.)

Mr. Speaker, how much time remains on each side?

Mr. Speaker, in light of the imbalance of time, I would be happy to have my friend from Missouri burn up a little more of his time, unless he has no further speakers.

Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Illinois (Mr. Emanuel).

Mr. Speaker, I believe we are at the end of our time, and I yield myself the balance of the time to close our side.

Mr. Speaker, I am feeling a bit like the man in the middle as we approach this debate. There has been some on our side that suggests the Pomeroy substitute provides too much estate tax relief. Indeed, the amounts are higher than acceptable. Obviously, we have heard from the other side they believe this is too low, but I would say to my friends in the majority, and listen to this carefully, those who approach this issue with an all-or-nothing mentality are likely to get nothing.

We cannot tell what is going to happen in the year 2010. None of us know. Except there is one thing we know, and look at this chart, the national debt is going to exceed $10 trillion, $10 trillion, 36 percent above where we are at today, and this is based upon established budget projections.

Do we really believe that that future Congress is going to sit blithely by and let this become implemented? There is not a nickel's worth of certainty in that. And we all know, because as damaging as this is to the budget in the first 10 years, with $290 billion of revenue loss, debt service added, this is a $326 billion hit to the budget in the first 10 years, look what happens in the second 10 years: $1.3 trillion impact in the second 10 years when we count the value of the debt service.

Do any of us think that we are really going to allow this to happen in the future years?

That is why I have advanced a very different alternative, entitled certain and immediate estate tax relief, because it is certain and it is immediate, and it deals by taking the estate tax to $6 million per couple, $7 million per couple by the time we get to 2009. It deals with the estate tax issues of 99.7 percent of the population.

Those of my colleagues looking at this chart may not be able to see this tiny red line, because that is what three-tenths of 1 percent represent with looking at the total population, three out of 1,000, and we know that on average those estates are going to average $15 million.

So for three-tenths of 1 percent we offer an alternative that has no capital gains, that is one-quarter of the cost, that immediately phases in estate tax relief and is far and away the superior way to go. All or nothing gets us nothing. Vote Pomeroy, immediate and certain estate tax relief.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I demand a recorded vote.

I thank the gentleman for yielding me this time.

Mr. Speaker, this rule brings an important debate to the floor. Let me tell you what is not on the floor. What is not being debated is whether there should be additional estate tax relief. We agree there should be. Much has been accomplished over the last few years in that regard. The estate tax level attached at $600,000 per individual at the beginning of this decade. So that, as my colleague from West Virginia talks about the concern of estate tax on small businesses and farms, that may have been more the case at that time. Certainly it is less the case now. The estate tax level attaches at $1.5 million per individual, $3 million per couple, and obviously the number of estates that would have tax consequences has fallen significantly.

Is it enough? No. Let us do something quite dramatic. The proposal that I am offering as a substitute would double from where we are today and in a very certain and immediate way bring to $6 million the estate tax exclusion for couples. Couples across this country possessing less than $6 million in assets, no estate tax. Nothing. Gone. Immediately and certainly. By the end of the decade, it moves to $7 million. By 2009, there could be $7 million in a couple's estate.

Is this meaningful? You bet it is meaningful. You look at the numbers, and it will tell you that we all but make this problem go away. Looking across this country, 99.7 percent of estates in this country no longer have estate tax issues under the substitute that I am advancing. That is 997 out of 1,000. That is pretty significant.

There are a couple of other differences. It is one-quarter of the cost of the majority proposal, $290 billion, that they are talking about. There are things they are saying that just are not so, that small businesses and family farms have major estate tax issues when the level is $6 million per couple. They do not.

I represent family farms and small businesses all across the State of North Dakota. I am telling you, if we set this level at $6 million per couple, to move to $7 million by the end of the decade, we largely take care of the problem.

But beyond that, going forward, there is yet another very important wrinkle in the majority proposal. This is the capital gains tax that their proposal would add. It is unlike a tax relief bill that I have seen before, because, for everyone it helps, it adds capital gains taxes for many more. Right now in the handling of an estate, there is no capital gains tax. Under their proposal, they establish something called the carryover basis. Not to get technical with you, but what that does is impose capital gains tax exposure on estates. The way the numbers work out, more estates are going to end up with capital gains consequences than get relief from estate taxes. So you help a few; you harm a lot. It does not make much sense to me. Again, at a total budget cost of $290 billion over the first 10 years and more than $800 billion over the second 10 years.

This is a budget buster, my friends. At a time when we are talking about how we address the long-term solvency of Social Security, to just, without a concern, pass a $290 billion bill to help three-tenths of 1 percent of the most affluent in this country seems to be standing priorities directly on their head. The very people that favor privatizing Social Security, which is going to add risk in the Social Security benefit, which is going to reduce benefits sharply because they change the inflation index going forward, that is going to reduce the benefits on our children and grandchildren, want to now run up the debt on our children and grandchildren in order to help that three- tenths of 1 percent, the very wealthiest among us. What kind of sense is that?

So we have proposed something quite different, immediate and certain estate tax relief, $6 million per couple, $3 million per individual, right now, and in 2009, $7 million per couple, $3.5 million per individual. And, once more, a proposal that I think we would want to consider closely, we could take the difference between the majority bill and our bill and dedicate it to the Social Security trust fund.

There is a lot of talk from the other side: Where's your plan? Where's your plan? How about this one? Let us start by addressing the problem and making a good deal of it go away.

If we took the difference, the amount of estate tax revenue over the $7 million figure at the end of the decade, and dedicated it to the Social Security trust fund, we could fill 40 percent of the hole over 75 years, almost make half the problem go away, while preserving benefits, while keeping the inflation adjustment that our grandchildren need.

I think in the consequence of our floor discussions today it is important to talk about both concepts, the immediate and certain estate tax relief alternative that we are advancing and what we could do with the difference. They say this estate tax has to be repealed, that it is the most unfair thing in the world. I can think of something even more unfair, and that is cutting the benefits of Social Security to our children and grandchildren. That is more unfair in my opinion.

We do not have to make that trade-off. We can make estate tax go away for 99.7 percent of the people in this country, take the balance between the bills, invest it in the Social Security trust fund and deal with almost half of the problem of the underfunding over the next 75 years.

That is what the minority is bringing forward today. It is a thoroughly considered and balanced alternative, I believe a reasonable and responsible alternative, and I urge the Members' consideration.

Mr. Speaker, I thank my colleague, the gentleman from Massachusetts, for leading the debate on this important rule in this fashion. I will just respond to my friend, the gentleman from Indiana (Mr. Pence), the preceding speaker.

It is important that we talk about real facts today and, honest to goodness, some of the language does not reflect what reality would be relative to the estate tax if you would pass the Pomeroy substitute and set it at $6 million per couple, taking care of, making estate tax completely go away for 99.7 percent of the people in this country. Language like ``waging war on small business'' and the majority reason for why small family farms do not pass on, 99.7 percent have no, absolutely no estate tax under the proposal that we are advancing. Clearly, that language does not match the facts of the proposal that we have advanced.

We heard about the immorality of taxing for the wealthiest three out of the 1,000 estates in this country. I believe another immorality is on the floor today, and that is the immorality of privatizing Social Security and reducing the benefits of Social Security for our children and grandchildren. An essential part of the Social Security debate is changing the inflation index that would reduce the benefit for our subsequent generations. In my opinion, that is immoral.

What I think we ought to have captured in this debate on estate tax is the trade-off, because they say it is just estate tax; believe me, it is also Social Security. If you take $290 billion out of the budget for the wealthiest three out of 1,000, you impact the ability to fix Social Security for everybody else. And the proposal I would like considered before the House is, let us give immediate and certain estate tax relief, 6 million per couple, and let us capture the amount over that dedicated to Social Security. That would fill 40 percent of the unfunded liabilities.

In context, we are looking at a 75-year solvency figure that the President has found so troublesome he wants to privatize Social Security. Well, by dedicating the sums that we capture with this three- tenths of 1 percent, we could fill 40 percent of the hole on Social Security. We would not have to cut benefits for our children. We would not have to cut benefits for our grandchildren.

So what we have is a very reasonable proposal going forward. Let us make the estate tax go away for 99.7 percent of the estates in this country. Let us not impose new capital gains taxes at the time of estates, and let us dedicate the difference to addressing Social Security. It brings us almost halfway there in terms of keeping all of the guarantees, while meeting the funding challenge over the next 75 years.

That is what is advanced by the minority proposal in this debate, and I hope it will get my colleagues' close consideration.