Mr. Speaker, I yield myself 3 minutes. I want to thank the Speaker, Leader Hoyer, and Chairman Rangel for bringing this bill to the floor today. The purpose of this bill is very straightforward: establish clarity and certainty in the Tax…
Mr. Speaker, I yield myself 3 minutes.
I want to thank the Speaker, Leader Hoyer, and Chairman Rangel for bringing this bill to the floor today.
The purpose of this bill is very straightforward: establish clarity and certainty in the Tax Code for the estate tax while exempting 99.7 percent of the estates in this country from this estate tax altogether.
The estate tax has changed 10 times in the last 11 years. Now, this has been a bonanza for the attorneys, the accountants, the planners, but it has been very unfortunate for the American people trying to make reasonable plans for their estates.
If recent history is bad, the next 2 years become completely absurd when it comes to the estate tax thanks to a law passed by Congress in 2001, estate tax repeal in 2010 replaced with a new capital gains tax that will impact many more farmers. In fact, for the 6,000 estates estimated to benefit from the tax change next year, 71,000 will find themselves with new tax obligations, this capital gains tax. Additionally, come 2011 the repeal goes away. In this Tax Code they repeal the repeal and we're back at a $1 million level for estates, $2 million joint, a 55 percent rate, the very rate it was in 2001.
There's going to be a lot of talk on the other side about how this law should go forward for the benefit of family farms. Let me tell you, the capital gains tax they are proposing for family farms is a catastrophe.
Let's say Grandma buys a farm at $100 an acre. It's now worth $2,000 an acre. She deeds it to you. She passes. You acquire the property. You go to sell the farm. You're going to pay capital gains tax under present law on all appreciated value over the $100-an-acre initial acquisition price. That's because under present law carryover basis is substituted for what we have under the existing framework, statutory basis.
Here's what the Farm Bureau said about carryover basis when it was considered some time ago, in 1979: carryover basis fosters an insidious bias against farmers and ranchers. And that's precisely what they would create.
Look at this. No estates with capital gains tax burden and 71,000 suddenly with capital gains burden under the law if we allow it to go into effect next year.
Another byproduct of this bill is to establish certainty once and for all on what the estate tax level is.
I yield myself an additional 30 seconds.
The 2009 level represents an exclusion from estate tax that is 75 percent higher than last year alone, where it went from $2 million up to $3.5 million. This chart shows who pays the tax and who doesn't under the 2009 law. You may not be able to see this little sliver. It's because it represents .25 of 1 percent. The estate tax goes away for 99.75 percent. That is almost perfection, about as close as this body is ever going to get. That's why we should vote for this bill and move it forward.
Mr. Speaker, I reserve the balance of my time.
Mr. Speaker, I just observe that the Tax Policy Center estimates that 100 farms or small businesses are estimated to be impacted by the estate tax under the 2009 levels across the entire country, and CRS has estimated that one-half of 1 percent of those may be in a position of having to liquidate something.
I yield 2 minutes to the gentleman from New Jersey (Mr. Pascrell).
I yield the gentleman an additional 30 seconds.
Mr. Speaker, I would just observe that the estate tax level last year was $2 million, this year $3.5 million, a 75 percent increase in the exclusion. Now, that is quite an index by anybody's measure.
I yield 2 minutes to the gentleman from Massachusetts (Mr. Neal), a member of the Ways and Means Committee.
I yield the gentleman an additional 30 seconds.
The bill on the floor would establish the capital gains exclusion at $7 million for a couple. I don't think we've ignored the small guys one bit with this legislation.
I yield Mr. Blumenauer of Oregon 2 minutes.
I yield the gentleman an additional 30 seconds.
Mr. Speaker, I would reference the earlier notation in the Farm Bureau that carry-over basis establishing this capital gains exposure falls particularly hard on family farms and ranchers.
With that, I yield my friend and colleague, Shelley Berkley from Las Vegas, 2 minutes.
I yield my friend and Ways and Means colleague from North Carolina (Mr. Etheridge) 2 minutes.
(Mr. ETHERIDGE asked and was given permission to revise and extend his remarks.)
I yield the gentleman 30 additional seconds.
Mr. Speaker, I am pleased to yield 1 minute to our distinguished majority leader, Mr. Hoyer.
Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, let me begin by congratulating my friend, Mr. Brady. He has been entrusted to manage time on the bill. He's done a great job of it. For many years I've had a running debate with Mr. Hulshof who's no longer with us as he did not run for reelection last year. I think Mr. Brady has more than picked up the banner from Mr. Hulshof, and I commend him for a good discussion.
I do believe that he begins with a curious point. He attacks the Democrats for budget deficits while advocating a bill that would cost twice as much as the bill on the floor. Repeal of the estate tax would lose roughly half a trillion dollars over the next decade. That is well over double the cost of the bill before the House. Another thing about that bill that you did not hear one speck of discussion on from the Republicans in the debate today is this capital gains tax issue. Let me briefly recount it.
Right now, when someone inherits property under an estate, if they go on to sell it, the capital gains is on the value of the asset at the time it was inherited. If we don't act, the law that is on the books brings a different formula--it's called carryover basis. When you inherit property and go to sell it, you pay capital gains on everything over the value of the initial acquisition--the price grandma paid when she got the farm or what have you. The Farm Bureau has called this insidious relative to its impact on farms and small businesses. We make that problem go away, and it needs to go away.
I don't think it's right, responding to another point made by my friend, Mr. Brady, to blame Mr. Clinton for the estate tax. President Bush had 8 years of governing after Mr. Clinton. Six of those years Republicans controlled this Chamber. If they needed to do something, they certainly had time to do it. But what they left us is a mess that now needs to be attended to; because to have the estate tax repealed next year, have a capital gains tax come in instead of the estate tax, a capital gains tax that will hit 71,000 taxpayers. While the 6,000 get relief on the estate tax, 71,000 have new capital gains exposure and then have it all go back to the 2002 levels in the year after that; $1 million, $2 million joint, 55 percent rate. It makes no sense.
The bill on the floor achieves almost unanimous relief from the estate tax while making the rules very clear: 99.25 percent get excluded from the estate tax. Those estates, joint estates, over $7 million would continue to have the exposure--although they would obviously have the wherewithal to apply to that. The rate 45 percent only applies to assets over the $7 million. So in a taxable estate there is zero tax on the first $7 million, 45 percent over that. On average, that means you have got about an 18 percent rate, not nearly half as had been described by the other side.
In closing, I have a quote from a Washington Post editorial talking about this situation in today's paper. It says, ``In one of those fiscal time bombs left from the Bush administration, the estate tax, having gradually dwindled, is set to be eliminated entirely next year-- only to spring back to life, full-force, in 2011. Unless something is done, 2010 will be the year to throw Mama from the train, tax-free. This would be terrible policy, not to mention unkind to Mama.''
So I believe that we need to act. The bill before us is a reasonable resolution of this issue. I urge its adoption.
I reserve the balance of my time.
I yield back the balance of my time.
Mr. Speaker, I make a point of order under clause 10 of rule XXI. The motion increases the deficit for purposes of that rule.
Mr. Speaker, I move to table the appeal of the ruling of the Chair.
Mr. Speaker, I rise in opposition to the motion.
I commence my comments by offering to yield to the gentleman if he would like to discuss the
capital gains tax implications of the motion to recommit.
Reclaiming my time, that wasn't much of an answer, so let me make it a little more clear.
The bill would impose a new capital gains tax obligation. Six thousand people would get estate tax relief if full repeal goes into effect; 71,000 have a new capital gains tax laid upon them because carryover basis is established instead of the step-up basis.
In other words, if you inherit Grandma's farm, if Grandma paid $100 an acre for it and it's now worth $2,000 an acre, and you go to sell it, you have capital gains on all appreciated value over $100. That's not how the law works now. How the law works now, if you have property worth $2,000 an acre, that's your basis. There's no capital gains if you would sell it for $2,000 an acre. The Farm Bureau has said this falls particularly insidiously on farms and small businesses, the very people they claim to be helping.
The motion to recommit, unfortunately, brings what has been a pretty respectable debate into, I think, some of the same overblown rhetoric that has plagued this issue in the past. The estate tax has changed 10 times in 11 years. Now, isn't it time we provide some certainty to the American people, not just more of the uncertainty that they offer?
What's more, it's not just certainty. We make the estate tax go away for 99.75 percent of the people in this country, 99.75 percent. But that's not good enough for them. They'll hold out for that last few tenths of a percent even if it means laying a capital gains tax obligation on 71,000 families to achieve that end.
Mr. Speaker, I yield the balance of my time to the gentleman from Florida (Mr. Boyd).