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23–195 2017

THE BURDEN OF THE ESTATE TAX 

ON FAMILY BUSINESSES AND FARMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 18, 2015 

Serial No. 114–TP01 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

PAUL RYAN, Wisconsin, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

SANDER M. LEVIN, Michigan, 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JOYCE MYER, Staff Director 

JANICE MAYS, Minority Chief Counsel and Staff Director 

SUBCOMMITTEE ON SELECT REVENUE MEASURES

DAVID G. REICHERT, Washington, Chairman 

PATRICK J. TIBERI, Ohio 

ERIK PAULSEN, Minnesota 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

RICHARD E. NEAL, Massachusetts 

JOHN B. LARSON, Connecticut 

LINDA SA ́ NCHEZ, California 

MIKE THOMPSON, California 


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C O N T E N T S 

Page 

Advisory of March 18, 2015 announcing the hearing ........................................... 2 

WITNESSES 

Mr. Brandon Whitt, Batey Farms .......................................................................... 6 

Mr. Robert E. McKnight, McKnight Ranch Co. .................................................... 12 

Ms. Karen Madonia, Chief Financial Officer, Illco, Inc. ....................................... 18 

Ms. Ray Madoff, Professor, Boston College Law School ....................................... 24 

SUBMISSIONS FOR THE RECORD 

Associated Builders and Contractors, Inc. ABC, statement ................................. 191 

American Farm Bureau Federation, AFBF, statement ........................................ 192 

Independent Electrical Contractors, IEC, statement ............................................ 198 

National Grocers Association, NGA, statement .................................................... 200 

National Lumber and Building Material Dealers Association, NLBMDA, 

statement .............................................................................................................. 202 

Small Business Legislative Council, SBLC, statement ........................................ 204 

Tire Industry Association, TIA, statement ............................................................ 209 


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THE BURDEN OF THE ESTATE TAX 

ON FAMILY BUSINESSES AND FARMS 

WEDNESDAY, MARCH 18, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:11 a.m. in 

Room 1310 Longworth House Office Building, the Honorable David 

Reichert [Chairman of the Subcommittee] presiding. 

[The advisory of the hearing follows:] 


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Chairman REICHERT. Good morning, and now we have entered 

into the subcommittee hearing on the burden of the estate tax on 

family business and farms. 

Today, as we consider the burdens family businesses and farms 

face planning for and paying the estate tax, or, as it is more commonly known, the death tax, we will have the opportunity to hear 

from witnesses who have experienced this challenge first-hand. 

Thank you to our guests and our witnesses for joining us today 

for this important hearing, and for sharing your stories. 

The story is the same in all of our districts, I would imagine: 

family businesses, business owners, and farmers work hard their 

entire lives with the goal of passing on the fruits of their labor, but 

face the sometimes insurmountable burden and hurdle of the death 

tax. And, in addition to the actual tax liability the death tax imposes, merely planning for it, regardless of whether these 

businesspeople and farmers end up owing it, is yet another challenge that we will hear and discuss today. 

In fact, as I am sure many of my colleagues have also heard, I 

consistently hear from local businesses about how this unnecessary 

tax threatens the livelihood of families. In my home state there are 

numerous examples of the harmful impact of the death tax. 

In Seattle, permanent relief from the death tax is critical for 

family-owned businesses like the Seattle Times, which is a fourth 

and fifth-generation family business. And, in my own district, in 

Issaquah, Washington last year, a family had to make the difficult 

choice to sell their farm which had been in the family for over 120 

years. This is a devastating decision to have to make, and they are 

not alone in making it. 

I thank Congressman Kevin Brady for his work to provide muchneeded permanent relief to families across the country, I’m proud 

to be a cosponsor of this legislation to repeal the death tax once 

and for all. I look forward to hearing from today’s witnesses this 

important issue. 

Chairman REICHERT. Mr. Neal, would you like to make an 

opening statement? 


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Mr. NEAL. Thank you very much, Mr. Chairman. And thank you 

for calling the topic today before us. I want to also congratulate you 

on becoming the chairman of the Subcommittee. As you know, 

being chairman of this Subcommittee leads to great thing. Former 

alumni include Chairman Camp, Chairman Rostenkowski, and 

Chairman Rangel. And former Chairman Tiberi isn’t so bad, either. 

[Laughter.] 

Mr. NEAL. Speaking of which, I have enjoyed working with your 

predecessor, and I look forward to working with you. 

We are here this morning to discuss the estate tax, which, for all 

the recent histrionics around the topic, has been, in one form or another, a part of the Tax Code since the days of our founding fathers. Whether used by John Adams to defend our democracy 

against a foreign threat, or by Lincoln to unite us, an inheritance 

tax has been recognized as a legitimate way to fund government 

operations and prevent concentrations of wealth. 

While the estate tax, or the inheritance tax, is necessary to fund 

the government, perhaps more importantly, the estate tax is necessary to our democracy. As our founding fathers observed, you 

simply cannot have democracy in a nation with extreme economic 

inequality and wealth concentrated in the hands of the very few. 

Mr. Jefferson noted, citing Adam Smith, that ‘‘A power to dispose 

of the states forever is manifestly absurd; the earth and the fullness of it belongs to every generation, and the preceding one can 

have no right to bind it upon posterity.’’ 

Such extension of property is quite unnatural. There is no point 

more difficult to account for than the right we conceive men to 

have to dispose of their goods after death. This sentiment has been 

adopted in various forms throughout our history by different Americans. 

One might remember that it was Theodore Roosevelt who was 

the first president to recommend a steep, graduated tax on inheritance. He, in fact, invited to the White House those to inform them 

that he was about to do it. More recently, Warren Buffett, George 

Soros, and Bill Gates, Sr. have all come out in strong support of 

maintaining a robust estate tax to prevent a concentration of 

wealth. 

Today’s hearing is an important one in this ongoing debate about 

the necessity of the estate tax. Today’s panelists represent wideranging views on the topic, and each should have their views 

heard. Some of the small businesses, farms, and farmers represented here today have legitimate concerns about being able to 

make ends meet. And, as I understand it, many farmers and small 

businesses find themselves asset rich but cash poor. Combines, 

tractors, and plows are not cheap, and are big investments that 

farmers rely upon to grow their business. 

So, I should point out that I think that there ought to be a way 

for this Subcommittee to recommend and for the full committee to 

embrace a notion providing some relief to farmers, if we can figure 

out how to do that specifically, so that the family maintains the interest. And I think that that is an opportunity that we perhaps 

could find common ground on. 

I would remind my colleagues, as we proceed to the suggestion 

that we should repeal the estate tax in its entirety, we serve in the 


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House of Representatives, not the House of Lords. And I think that 

that is a noteworthy example of what happens over time, if we are 

not careful about the concentration of wealth for those who miss 

the opportunity to present Steve Jobs or Bill Gates, Jr., as well. 

Congress has recognized the plight of these businesses, and we 

have enacted numerous provisions to help our nation’s farmers and 

small businesses, whether through generous expensing rules or accelerated bonus depreciation, both of which I have supported. I 

think that this was in addition to raising the thresholds on the estate and the gift tax. We have gone from a $1 million exemption 

with a top rate of 55 percent to a $5 million exemption indexed for 

inflation, with a top rate of 40 percent. While our nation’s farmers 

and small businesses have legitimate concerns about the estate tax, 

it is my hope that this argument this morning is not being used 

for the purpose of ending the estate tax for simply America’s 

wealthiest people. 

The facts seemingly bear this out. As the Tax Policy Center recently revealed, only 20 small businesses and farm estates nationwide owed any estate tax in 2013. Furthermore, they point out that 

that estimate of those 20 estates owed just 4.9 percent of their 

value in tax, on average. This trend to small business and former 

levels also corresponds for all taxpayers, as well. As Joint Tax has 

pointed out, in 2013 there were 2.6 million deaths in the United 

States, and 4,700 estate tax returns reporting some tax liability 

were filed. This means 99.85 percent of all estates owed no estate 

tax at all. By comparison, in the mid-1970s, taxable estate returns 

exceeded 6 percent of all deaths. 

Mr. Chairman, I would like to thank you for calling this hearing. 

I look forward to the discussion and hearing from our witnesses, 

and to seek ways to improve our current estate tax. 

Remember, the estate tax is not a tax on Conrad Hilton. The estate tax is a tax on Paris Hilton. And, incidentally, who could be 

against that? 

[Laughter.] 

Mr. NEAL. And I call that up because I think that is a noteworthy example of what would happen if we broadly repealed the 

entire estate tax. And thank you, Mr. Chairman. 

Chairman REICHERT. Thank you, Mr. Neal. Before I introduce 

today’s witnesses, I ask unanimous consent that all Members’ written statements be included in the record. 

[No response.] 

Chairman REICHERT. Without objection, so ordered. 

We will now turn to our panel of distinguished witnesses. And 

I would like to welcome, first, Mr. Brandon Whitt of Batey Farms 

in Murfreesboro, Tennessee; second, Mr. Bobby Knight, owner and 

operator of—I am sorry, McKnight—of McKnight Ranch Company 

in Fort Davis, Texas; and third, Ms. Karen—help me. 

Ms. MADONIA. Madonia. 

Chairman REICHERT. Madonia? A chief financial officer of Illco 

Company, a family-owned Chicago-area distributor of heating, ventilation, air conditioning, and refrigeration equipment parts and 

supplies. And, fourth, Professor Ray Madoff of the Boston College 

Law School in Newton Center, Massachusetts. 


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Thank you all for joining us today. You will each have five minutes to present your oral testimony, and your full written testimony has been submitted for the record. 

Mr. Whitt, we will start with you. You are recognized for five 

minutes. 

STATEMENT OF BRANDON WHITT, BATEY FARMS 

Mr. WHITT. Good morning. I certainly appreciate the opportunity to be here. And Chairman Reichert and Ranking Member 

Neal, and Members of the Subcommittee, my name is Brandon 

Whitt. I operate a seventh-generation farm in Murfreesboro, Tennessee, where I farm with my wife, Katherine, and my father-inlaw, John. 

In a suburbanized area just outside of Nashville, Batey Farms 

dates back to 1807. Beginning from a Revolutionary War land 

grant for military service, over its 208 years the farm has seen 

many faces, developments, victories, and certainly failures. But one 

thing remains constant: we have strived to uphold the principle of 

our family motto of preserving the past and embracing the future. 

Batey Farms is a very diverse—and includes a market that sells 

fruits, vegetables, and pork we produce directly to consumers. In 

addition, we farm 1,800 acres of row crops, and 250 acres of hay 

on our own land, and land we rent from neighboring land owners. 

My wife and I manage the day-to-day operation of our farm business, while my father-in-law, who still works daily alongside me, 

owns the land that we farm. We employ one full-time employee, 

two part-time, and over a dozen seasonal workers. Over 65,000 customers pass through our farm gate annually, and we are currently 

investing to expand our agritourism attractions, so that our more— 

so that more of our urban neighbors will visit and make a connection to modern-day agriculture. 

When my wife’s grandmother passed away in 1998, my father-inlaw, who had farmed the land for his entire life, was faced with a 

big—with a huge estate tax burden. The farm, at the time, was a 

little over 600 acres. Land values were booming, and the value of 

the farm had doubled over the previous 10 years. John ended up 

having to sell a large portion of the land to pay estate taxes. This 

may not sound like much of a sacrifice, giving up 120 acres, but 

it left him with 483 acres to farm, and it completely changed the 

farm business. The land was lost to development. And having 

houses so close to our fields and the remaining land, it made it impossible [sic] to continue raising cattle. 

Fast-forward to today. We still farm that same land. Only now 

it is easily valued at more than $25,000 per acre. Some might say 

that we should sell out, start over somewhere else. But this is not 

my family’s plan. We believe that Batey Farms will be a viable 

farm business far into the future, and we hope that our children 

will be the eighth generation to farm our land. We believe that our 

farm adds value to our town, to our neighbors, and value to the 

open space that our customers have value—for a local food source, 

and that our farm market creates a sense of community. We intend 

to honor our motto, and continue our farming business as long as 

we are able to. 


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My father-in-law, John, is now 72 years old. As we look to the 

future, we can’t help but worry about what will happen when he 

passes away. We have spent countless hours talking with financial 

advisors, accountants, and attorneys, trying to put together a plan 

that will allow Batey Farms to remain a viable business. We know 

that we will face an estate tax when my father-in-law dies, and we 

are planning now to try to avoid having to sell more acres to pay 

the tax. I can’t help but think about what our farm might be if we 

could have invested all that time and energy into our own business. 

My story is the story of young farmers all across the country. Agriculture certainly looks different on farms from state to state. But 

we all face the same reality that an uncertain tomorrow can bring. 

We face decisions about making long-term investments on our 

farms and ranches, without the benefit of knowing the price we 

will be paid for our products. We deal with unpredictable weather 

that can change a good year into a bad one with a single storm. 

There isn’t much we can do about these risks. They are a normal 

part of the uncertainty that goes along with farming. But why 

should uncertainties over estate taxes be added to these others? 

Our job is hard enough, as it is. I urge Congress to abolish the federal estate tax, so that farms like mine can better use their resources to build a stronger business, and a better community. I 

urge Congress to act quickly to end estate taxes, so that no further 

farmer or rancher has to sell part of their business to pay this misguided tax. 

Thank you very much for the opportunity to be here. 

[The prepared statement of Mr. Whitt follows:] 


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Chairman REICHERT. Thank you, Mr. Whitt. 

Mr. McKnight, you are recognized for five minutes. 

STATEMENT OF ROBERT E. MCKNIGHT, 

MCKNIGHT RANCH COMPANY 

Mr. MCKNIGHT. Thank you, Chairman Reichert, Ranking Member Neal. I appreciate the opportunity to be here today. My name 

is Bob McKnight, a seventh-generation cattleman from Fort Davis, 

Texas, and certainly my privilege to appear before this Committee 

today to speak on behalf of the cattlemen and women across this 

country to discuss an uncomfortable issue that too many of us have 

had to deal with, that being the death tax. 


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I am here to share my story today, so hopefully we can leave 

with a better understanding of the personal impact this has on 

families like mine and many like mine. Having dealt with the 

death tax on multiple occasions, I can assure you it is not easy to 

settle the estate of a loved one while mourning the loss of that 

loved one. And then, to find out that estate is subject to the death 

tax is pretty tough. How will I pay the estate tax? We are going 

to have to sell off part of our business, take out a loan, layoffs. 

These are all tough questions I had to face when confronted with 

the death tax. And, unfortunately, this story is more common than 

it should be. 

As a cattleman, the most important part of our family’s livelihood is the health and safety of our livestock. Every day myself, 

our employees, we go out and put the needs of our livestock ahead 

of our own. Cattle don’t take a day off; we can’t, either. I am financially and emotionally invested in the success of this operation. 

And I have a responsibility which I take very seriously, and that 

is the care for the animals and the people that work for us. 

Our ranch is a family-owned small business located in Southwest 

Texas. Like other small businesses, we have the worries of making 

payroll, complying with numerous federal/state regulations, bills, 

loans, taxes. I face the same stresses every business owner out 

there faces, plus we have to deal with Mother Nature. We never 

know what she has in store for us. 

In recent years our ranch and others have been ravaged by 

wildfires while in the throes of a drought of historic proportion. 

Many in Texas have been forced to liquidate their herds—in some 

cases, their entire operation. The exodus of cattle out of Texas is 

unprecedented. We have had some rains. The country is going to 

take time to heal. To get back to our historic numbers is going to 

take some time. I think we are up to the task, but it is going to 

take a little time. 

When times have been lean, we have had to make sacrifices to 

keep our business above water, keep our employees on the ranch. 

But sometimes you run out of places to cut, and you have to make 

real hard choices. And that means laying off season employees. 

This is exactly what happened to our family, precipitated by the 

death tax. I had to let go of season employees, and they had to seek 

work elsewhere. 

The skill set that we need on our agriculture operations is very 

unique, and it takes years to develop. And when you lose that skill 

set, it is difficult, if not impossible, to replace it. I would give anything to have those guys back. But, unfortunately, I don’t believe 

that is going to happen. 

Many farmers and ranchers have had the same experience with 

the death tax. And, even with the current exemption levels, I believe there is a lot of angst out there with these rising land values: 

Is it going to trigger a death tax? 

That is why many families, I think it is imperative they continue 

to invest in planning and complying with the estate tax. And, unfortunately, that money used to do that comes off the top. It is 

after-tax money spent on investing, rather than investing in your 

company. And, even with an estate plan, the best estate plans, it 

takes years to transfer. And, again, compliance is not free. 


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As someone who has been on the negative end of the death tax, 

I just have one question: What are the positive benefits of the 

death tax? When faced with a death tax, I am no longer thinking 

about how I am going to grow my business, hire more employees. 

I am focused on where I am going to have to cut. Are we going to 

have to liquidate? Are we going to have layoffs? How are we going 

to control this loss? I would rather focus on expanding our business, reinvesting in our community by creating more jobs. 

The death tax impacts more than just my family. It affects our 

employees and the family businesses around us. In the small rural 

communities of Texas, these family ranches have support businesses all around them. And when you are feeling it, I can tell you 

it runs through the whole community, and it is pretty tough. 

The death tax is a death warrant for far too many businesses. 

I feel the best solution, the fair solution, is a repeal of the death 

tax. Thank you. 

[The prepared statement of Mr. McKnight follows:] 


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Chairman REICHERT. Thank you, Mr. McKnight. 

Ms. Madonia, you are recognized for five minutes. 

STATEMENT OF KAREN MADONIA, CHIEF FINANCIAL 

OFFICER, ILLCO, INCORPORATED 

Ms. MADONIA. Chairman Reichert, Ranking Member Neal, and 

Members of the Subcommittee on Select Revenue Measures—my 

name is Karen Madonia, and I am the chief financial officer of 

Illco, a Chicago-area distributor of heating, ventilation, air conditioning, and refrigeration equipment parts and supplies. Thank you 

for giving me the opportunity to talk about the estate tax and its 

effect on family businesses. 

As background, Illco was a very small company when my dad 

bought it in 1973. At that time he was 32 years old with a wife, 

3 daughters, and a mortgage, but he knew he wanted more than 

just a job. He wanted to create something permanent, to be in control of his own destiny. With help from my grandfather, my dad 

took a risk and went into business for himself. In those early years 

he worked every job at the company, 7 days a week, 10 to 12 hours 

a day. But his passion for the industry, his commitment to his employees, and his drive to grow his company kept him pushing forward. And 40 years later, he has a business that employs 97 people 

in 3 states, and generates $42 million in revenue. 

My sisters and I grew up understanding that if we wanted to be 

successful at anything, we had to work hard and stay focused on 

our goals. We are proud to work alongside our dad now, and look 

forward to making our own mark on the family business in the 

coming years. There is also a generation behind us just beginning 

to consider career options. Perhaps some of them will join us; that 

is certainly my hope. But after years of listening to us struggle to 

figure out how to grow the business while navigating the estate tax 

waters, I imagine all of them will think twice before making that 

leap. 

Proponents of the estate tax will tell you that it prevents the concentrated accumulation of wealth in our country. They will tell you 

that our nation needs to increase taxes on the wealthy, because 

they need to pay their fair share. On the surface, that is a pretty 

safe argument to make. It is easy to say the solution to our fiscal 


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issues is to increase the burden on those who can afford it the 

most. But what is fair about paying taxes your whole life, only to 

have to pay even more at death, simply because you are leaving a 

business behind? 

What is always overlooked is the effect of the estate tax on the 

family business. In most cases, we are not talking about passing 

on bank accounts with multi-million-dollar balances. We are talking about businesses where most of the net worth is tied up in inventory, accounts receivable, equipment, and real estate. At Illco, for example, we carry an inventory valued at $12 million 

and an accounts receivable of about 5 million. Our inventory has 

to be high. We provide vital heating, cooling, and refrigeration 

parts and supplies to hospitals, schools, nursing homes, and grocery stores. And when that equipment breaks down, it needs to be 

fixed immediately. 

After paying our taxes and making our annual profit-sharing 

contribution, the income that is left is put back into the company 

so we can continue to carry an extensive inventory, extend payment terms to our customers, and maintain our fleet and our buildings. If something happened to my dad, and we were left with a 

large estate tax bill, we would have to choose between shutting 

down branches, laying off workers, or liquidating inventory, just to 

be able to pay a tax bill that only occurred because an owner died. 

Over the last few years, my dad has spent countless hours and 

entirely too much money trying to figure out how his company can 

outlive him. Instead of focusing on growing his business, he has 

had to strategize about how to pass his company on to his kids 

without having to dismantle it. Most of our strategic management 

decisions, whether they are about day-to-day operations or opportunities to expand, involve consideration of the estate tax in one way 

or another. 

We have opted to maintain a large cash reserve as a precaution. 

Other companies choose to protect themselves by purchasing insurance. Either way, money that could be used to grow and create jobs 

is sitting on the sidelines. The estate tax is a huge road block to 

successful family businesses undergoing generational transfers. 

Think about that: Perhaps the greatest challenge in transitioning 

a business from one generation to the next is our own Tax Code. 

Small business owners take huge risks at great personal sacrifice, and they truly are the backbone of the American economy. 

No one is asking for it to be easy. In fact, my dad would probably 

be the first one to tell you that overcoming the challenges is probably the most rewarding part of owning your own business. But it 

shouldn’t be the case that the thing that keeps you up at night is 

the worry that you may leave your kids with a huge tax burden 

when you die. 

I believe that most people would be proponents of an overhaul to 

our Tax Code. There probably are too many exemptions and loopholes that only upper-income taxpayers can take advantage of, and 

those topics are worthy of a national conversation. But taxing the 

estates of successful entrepreneurs is punitive, and that is not the 

role our Tax Code should play. 

Two years ago, when Congress last addressed the issue of the estate tax, you gave the small business community some certainty by 


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establishing an exemption and indexing it to inflation. While we 

still maintained that full repeal was the right answer, we appreciated that you understood that constantly changing the rules 

made it impossible for us to properly plan for the future of our 

businesses. I respectfully ask that you again carefully consider all 

the ramifications of estate tax policy, and then vote once and for 

all to permanently repeal the estate tax. 

It is time to encourage families to create wealth by starting their 

own businesses, not threaten to take it away from them if the government thinks they have accumulated too much. 

Thank you for the opportunity to share my family story with you. 

[The prepared statement of Ms. Madonia follows:] 


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Chairman REICHERT. Thank you, Ms. Madonia. 

Ms. Madoff, you are recognized for five minutes. 

STATEMENT OF RAY MADOFF, PROFESSOR, 

BOSTON COLLEGE LAW SCHOOL 

Ms. MADOFF. Thank you. Chairman Reichert, Ranking Member 

Neal, Members of the Subcommittee, my name is Ray Madoff, and 

I am a professor at Boston College Law School, specializing in estate planning and tax policy. Thank you for inviting me to testify 

today, and for holding this hearing. 

In my comments today, I would like to start by briefly addressing 

the family farm and business issue, and then take the bulk of my 

time to talk about the important role of the estate tax, and the serious costs of repeal. 

As other witnesses have testified this morning, family farms and 

businesses are an important part of our society. And I believe that 

we should do what we can to protect them. We have some protecVerDate Sep 11 2014 04:57 Aug 03, 2017 Jkt 023195 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\23195.XXX 23195

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tions in place already. We have a large, $10 million exemption and 

provisions allowing taxes to be paid over 15 years. But if these are 

not sufficient, Congress should address the situation with targeted 

solutions. 

There are two possibilities that are pretty easy: one would be to 

lift the cap from Section 2032(a), allowing special valuation for 

land would help our farmers here; or, revive Section 2057, but instead, provide an unlimited exemption for family businesses and 

farms, insofar as they are operated by family members. We have 

the statutes in place; we can easily enact them. 

However, over 90 percent of the assets subject to the estate tax 

are assets other than closely-held businesses. And the family farm 

and business issue should not serve as a decoy to hide the true 

beneficiaries of estate tax repeal, especially given the value of the 

estate tax and the cost of repeal. 

The estate tax plays a critical role, in terms of promoting fairness in our tax system, because it provides a counter-weight to the 

extraordinary income tax benefits given to those with inherited 

wealth. Our income tax system favors taxpayers with inherited 

wealth in two important ways. 

First, inherited income is entirely excluded from the income tax 

system. A person who inherits $100,000 or $100 million is treated 

the same for tax purposes as a person who inherits nothing. This 

failure to tax inherited income is particularly glaring, in comparison to the taxes imposed on workers, who are subject to income 

taxes of up to 39.6 percent, and payroll taxes of up to 15.3 percent. 

Because of this difference, a construction worker who earns 

$60,000 after taxes gets less than $44,000. But if another individual inherits $60,000, she gets to enjoy that $60,000 entirely 

undiminished by taxes. 

Second, those who inherit wealth also get to avoid capital gains 

taxes due to the step-up in basis at death. Consider the case of a 

person who had invested $20,000 in Apple stock in the 1980s. If 

that person died in 2015, the stock would be worth over $4 million 

at the time of death. But, under our current income tax system, no 

one will ever pay taxes on that $4 million of gain. This extraordinary benefit is only afforded those who obtain property by inheritance, not by any other way. 

The estate tax also provides a valuable source of revenue for the 

government. While some say it isn’t very much, there is still a lot 

that can be done with $270 billion over 10 years, including things 

like fully funding school nutrition programs, which would provide 

nutritious meals to 31 million children a day, or funding the program for free community college tuition that would benefit more 

than 9 million students, which could be funded 5 times over with 

this money. Even if the goal is to reduce the size of government, 

surely there are other taxpayers more in need of a tax break than 

the heirs of fortunes of over $10 million. 

In addition to the cost of foregone revenue, the repeal of the estate tax would impose other burdens as well. Most importantly, it 

would increase wealth inequality, as the financial benefit of repeal 

would flow to America’s wealthiest families. 


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Moreover, these families are likely to hold on to the wealth, as 

estate planners have perfected the art of protecting inherited 

wealth in perpetuity, through the creation of dynasty trusts. 

Wealth inequality is not just a product of the market, but it is 

significantly affected by the government policies, especially tax 

policies, that allocate societal resources. Over the course of much 

of the 20th century, these policies resulted in a strengthening of 

the middle class. However, since the 1980s, wealth inequality has 

grown considerably, particularly among those who would most benefit from estate tax repeal: the wealthiest one-tenth of one percent 

of the population. In 2010—in 2012, that tiny sliver of Americans, 

those with $20 million or more, owned the same amount of wealth 

as that which is owned by 90 percent of the population. Estate tax 

repeal would exacerbate this concentration of wealth. 

Wealth inequality threatens democracy. Both Thomas Jefferson 

and John Adams expressed their concern about the risk to democracy that could result from extreme wealth inequality. 

Wealth inequality also hurts the economy. Studies persistently 

show that high concentrations of wealth correlate with poor economic performance. 

Finally, repeal of the estate tax could have a devastating impact 

on our charitable sector. We count on our charitable sector to finance education, health care, scientific research, art, the social 

safety net. And the estate tax charitable deduction encourages 

charitable giving. And though the result would not be intended, it 

is quite likely that repeal of the estate tax would reduce charitable 

giving. Though it is difficult to quantify this impact, even a small 

reduction in charitable giving could prove devastating to the sector, 

and to the individuals that it serves. 

Thank you again for inviting me to testify today. I am happy to 

answer any questions that you might have. And I hope that my 

comments are helpful to the committee as it considers this very important issue. 

Chairman REICHERT. Thank you, Professor, for your testimony. 

Thank you all for your testimony. And I am sure Members of the 

Subcommittee have a few questions for you. And I will begin with 

Ms. Madonia. 

You have highlighted several elements of your business that 

make estate planning difficult, including inventories and the capital-intensive nature of your business. Is this typical for businesses 

in your industry? 

Ms. MADONIA. Yes, very typical. I mentioned in my testimony 

that we—— 

Chairman REICHERT. Microphone. 

Ms. MADONIA [continuing]. I am sorry. The parts that we sell— 

refrigeration, heating, air conditioning—if a refrigeration unit goes 

out in a grocery store, you have a limited amount of time before 

that food is lost. If the air conditioning system goes out in a hospital, you got to get that up and running pretty quick, so that patients can be taken care of. 

So, we have to carry a pretty heavy inventory. When customers 

come in to buy something, we have to have it on the shelf, so they 

can walk out the door with it. And then there are trucks, buildings, 


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and warehouse equipment—there is a huge capital investment in 

our industry, yes. 

Chairman REICHERT. Would you say that the death tax is a 

general concern for those businesses that do similar work that you 

do? 

Ms. MADONIA. Absolutely. We—— 

Mr. THOMPSON. Estate tax. It’s not the death tax. It’s the estate tax. 

Chairman REICHERT. Pardon me? Estate tax, yes, I am sorry. 

Ms. MADONIA [continuing]. Yes. We come to Washington every 

year with our trade association, and this is always the first issue 

because it is an industry made up of a lot of small family businesses. And, yes, it is top on our list every year. 

Chairman REICHERT. What is the membership of your association? 

Ms. MADONIA. It is Heating, Air-Conditioning and Refrigeration 

Distributors, and there are between 450 and 500 members. 

Chairman REICHERT. Okay, thank you. Mr. Whitt, it appears 

from your testimony that Batey Farms is facing several pressures 

that are changing how you farm, including increasing land values 

due to expansion of Nashville. Would you say that Batey Farms is 

typical, in having to struggle with increasing land values, and the 

changing nature of farming? 

Mr. WHITT. Absolutely, Chairman Reichert. You know, we are, 

fortunately, on the outskirts of urban life, which provide many opportunities for our farm to connect consumers to agriculture today. 

Unfortunately, that comes with an extremely large increase in land 

value. 

Sure, it would be great to sell out and move somewhere else, and 

go buy 10 times the land, but that was never our intent to do so. 

We want to have that connection in our own personal community 

to share our story, to provide agriculture to our community. I don’t 

see—you know, estate tax in our case is going to be a huge problem 

for us, because of that increase in land value over the last several 

years. 

Chairman REICHERT. You touched on this in your testimony, 

but again I will give you an opportunity to sort of amplify your answer a little bit. Is this driving an even greater concern about the 

death tax than in years past for American farmers? 

Mr. WHITT. Absolutely. 

Chairman REICHERT. And—— 

Mr. WHITT. As land value—not only our personal farm, but land 

values in general continue to increase. So our question is, you 

know, when and if things happen to that family member now, what 

is going to happen? Because that death, what kind of bill are we 

going to be facing because of the death? And are we going to be 

able to hold on to that business? 

You know, unfortunately, the only value we have is in land. I can 

assure you that my investment into my community through my expenses far outweighs my accumulation of wealth that I accumulate 

on my farm. 

Chairman REICHERT [continuing]. Okay, thank you. 


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Mr. McKnight, you said in your testimony that you are a seventh-generation rancher. Is that common among ranchers, to have 

that kind of a history? 

Mr. MCKNIGHT. In lots of Texas and across the country, yes. 

These are old ranches that have been put together through a lot 

of hard work, and it is generations just adding to it and adding to 

it. And you get to a point to where the death tax—estate tax, I am 

sorry—can be very tough. But, yes, these ranches weren’t put together in a day. It is generations of hard work. 

Chairman REICHERT. And you know a lot of these seventh-generation, fifth-generation—— 

Mr. MCKNIGHT. Seven is a long time. I know multi-generational 

families, yes—— 

Chairman REICHERT [continuing]. Multi-generational families—— 

Mr. MCKNIGHT [continuing]. Three, four, five, yes, absolutely. 

Chairman REICHERT [continuing]. Would you say that the pressures you are facing are typical for ranchers across the United 

States? 

Mr. MCKNIGHT. Absolutely. 

Chairman REICHERT. And is the death tax a constant source of 

concern? 

Mr. MCKNIGHT. Absolutely. Yes, sir. 

Chairman REICHERT. Mr. Neal, you are recognized. 

Mr. NEAL. Thank you, Mr. Chairman. Professor Madoff, some 

have argued that Congress should repeal the estate tax because it 

serves as a double tax on income. Could you shed some light on 

that argument? 

Ms. MADOFF. Yes. I think the double tax argument is one of the 

real misunderstandings about how the tax system works. 

There are three things that are important to recognize. First of 

all, the bulk of assets that pass at death have never been subject 

to tax, because they are appreciated capital assets. And, due to the 

step up in basis at death that I talked about earlier, that wealth 

has never been taxed. 

In addition, double taxation doesn’t really capture anything, because there is no principle that money that has been taxed to one 

person shouldn’t be taxed to another person. If I earn money and 

I pay taxes on it, and then I pay money to my mechanic for fixing 

my car, my mechanic can’t say, ‘‘Hey, that income has already been 

taxed when Madoff earned it.’’ Each taxpayer has to pay taxes. 

In addition, taxpayers often pay taxes, multiple types of taxes. 

You pay income taxes, payroll taxes, sales taxes, property taxes. 

There is no principle of double taxation, avoiding double taxation, 

in the tax system. 

Mr. NEAL. Mr. Whitt, based on your testimony, if we were able 

to find a way to address the land issue that you have spoken to 

specifically, would that satisfy the notion that we could accommodate you without repealing the entire estate tax? 

Mr. WHITT. Well, I believe, unfortunately, then, in some cases, 

yes, it could. But I think, when we look at the difference between 

farms and small businesses all across this country, where do we set 

that limit, there is always going to be winners and losers in that 

case. And, without full repeal, I don’t see how we can be fair to 


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McKnight and unfair to me, just because of the differences in our 

businesses. 

Mr. NEAL. I would say that that is the nature of the tax system, 

though. There are winners and losers in the tax system. I think we 

all subscribe to that basic premise, that, as you try to shift the Tax 

Code around, that it is like squeezing toothpaste with the cap on. 

Mr. WHITT. Well, I don’t understand why he should have to sell 

part of his business, just because he is over an exemption. Why 

should he have to sell his business? It is as detrimental to him to 

sell part of his business, just because he is over a limit and I am 

under. 

Mr. NEAL. Okay. Now, just a reminder of what this Committee 

has done, the full Ways and Means Committee has done, now, 

just—and it is March. We have already proposed, over the objections of some of us, $317 billion in tax cuts, unpaid for. And the 

proposal here, if this were to take place, would add $270 more billion dollars to tax cuts, unpaid for. So, that means that this Committee, in full, well into early April, before tax-filing season, will 

have proposed $587 billion worth of tax cuts that are unpaid for. 

Now, let me tie that to this argument. That means that we will 

be proposing $587 billion in tax cuts, and only $567 billion of defense spending. So the same people that will argue here we should 

increase defense spending, including the President, will simultaneously argue that we should cut taxes by $587 billion. And I 

would submit, as good as the arguments are that you have all 

made this morning, there isn’t anybody here who could run a family farm or business based upon the premise that has been offered 

by this Committee. 

So, part of this is messaging that you are hearing today, and I 

understand that. People make arguments, and you want to, obviously, get those arguments to conform to a policy at some position. 

But we should not miss the fundamental point that these tax cuts, 

if they were to be put in place, mean that somebody else has to 

pay. Because, as Mr. Whitt has correctly noted, as you move the 

items around in the Tax Code, then there are those that will pay, 

and there are those that will pay less. 

The argument that most of us hold today is that we should not 

remove the estate tax for the wealthiest Americans, based upon 

this notion that, by proffering some relief to the small family farmer, who has a legitimate argument here today, that we should cut 

taxes for Paris Hilton. 

Chairman REICHERT. Thank you, Mr. Neal. Mr. Tiberi, you are 

recognized. 

Mr. TIBERI. Thank you, Mr. Chairman. Great testimony. Wow. 

Mr. Neal, I love you, because you—— 

Mr. NEAL. I will be able to put that on my campaign brochure. 

[Laughter.] 

Mr. TIBERI [continuing]. Well, you might not want to. And the 

reason why is because he is trying to come to yes, in terms of trying to fix the problem, except for the end of your statement, with 

respect to tax cuts, in all due respect, from my perspective, because 

we can, in this place, not pay for a trillion-dollar spending bill, but 

then we have to pay for tax cuts. 


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My dad—you love it when I talk about my dad, don’t you? My 

dad, when I was 16 years old, first job at McDonald’s, said, ‘‘We 

have a crazy tax system.’’ Sixth-grade education, immigrant to 

America. ‘‘You get taxed when you earn it, you get taxed when you 

save it, which is crazy’’—this is my immigrant father—‘‘because it 

discourages you from saving, and then you get taxed when you die, 

if you happen to save it, and try to invest it, and try to get a nest 

egg for your family.’’ 

Mr. NEAL. Would—— 

Mr. TIBERI. The debate that we have—— 

Mr. NEAL [continuing]. Would the gentleman yield? 

Mr. TIBERI [continuing]. at the end of my statement, I would be 

happy to. But the debate that we just heard is fabulous, because 

it is like a debate that I have with my friends who run conservative 

or liberal think tanks. You have got reality, and you have got theory. 

And what I loved about the three of your testimonies,’ who are 

living in the real world today, is that you are dealing with this 

today. It is not theory. And you are not living Warren Buffett’s life. 

You are not living Bill Gates’s life. You are living a life, and your 

statement about your father was awesome, awesome. Because what 

is so great about America is that my mom and dad taught me that 

with hard work and a little luck and a little bit of elbow grease, 

you can actually accomplish something in America. 

The Tax Code often times makes really weird—or makes people 

make weird choices, and it does create winners and losers. But the 

reality is—I have talked to people in Central Ohio—because of this 

Tax Code, they spend so much time trying to think—and money. 

I had a guy tell me, second-generation trying to become a third- generation family-owned car dealership, $50 million in inventory 

on his lot. He doesn’t have a private jet; he doesn’t have Warren 

Buffett’s issues. He is trying to run a business, trying to hire more 

employees, trying to pass a business on to his son, and he is spending more time and money—that he could otherwise use to hire 

more people—trying to make sure the business doesn’t have to be 

sold if he dies, or when he dies, which is what you all said. 

So, I appreciate the fact that we are trying to figure out the family farm. But with all due respect to the two of you, it is more than 

the family farm. It is that third-generation business. 

I talked to a business guy who sold his business to his employees, which I think is great, by the way—ESOP, great in Ohio, great 

in Minnesota, you support it. But one of the reasons why he did 

it was because of the estate tax law. But this is before we passed 

the $5 million exemption. And his son is still involved in the business, and so is his daughter, but they are no longer the owners. 

They are part of the ownership team. But that was a decision 

made, in part, because of our tax law. 

So, I appreciate the fact that you three came here and testified 

today, and really, really applaud you. This is hard. And this 

place—it is hard to get things done. But you represent why I believe Mr. Brady’s legislation is the right thing to do. 

Ms. Madonia, can you just go into one other issue, or expand on 

it? In terms of the subject of the death tax, and the exemptions 

that you talked about, can you go into that a little bit further? 


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Ms. MADONIA. Yes. We spent a lot of time in our family talking 

about the estate tax, and we have got this generation of kids. There 

are eight—my dad has eight grandchildren, and several of them 

are in school or have graduated from school with business degrees 

with some hopes, I hope, of coming to work for us. But this is an 

issue that we have talked about around our family tables for years, 

trying to—where my dad has been trying to figure out the best way 

for him to continue to grow the company and still preserve it for 

us. 

We watched him our whole lives, we watched my dad work, you 

know, 10 to 12 hours a day, literally. He would—when he first 

bought the business, he would make the deliveries, and he would 

work the counter. At 5:00 he would go into his office and do receivables and payables. He did all of it. And we watched him struggle 

through all that. And to watch him try and figure out how he can 

pass it on to us, and let us make our mark on it without having 

to dismantle part of it is, really, just heartbreaking. 

Mr. TIBERI. Thank you. 

Chairman REICHERT. Thank you, Mr. Tiberi. Ms. Sa ́nchez, you 

get to follow Mr. Tiberi. 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman, and thank you to all 

of our witnesses for joining us here today. 

The estate tax was originally instituted to ensure that the very 

wealthiest families, those who have benefitted from the greatness 

of this country, and the opportunities available in the economy, 

could contribute back to that system, so that others would also 

have those opportunities and chances to succeed. And, over time, 

Congress has whittled away much of the fairness that was in that 

system. So much so that, now, 99.85 percent of estates—99.85 percent of estates—are now exempt from paying any estate tax, whatsoever. 

If the existing exemptions and special provisions for family farms 

and true small businesses aren’t enough right now, then let’s specifically look at that. Because I am willing to work on that. I heard 

your testimony; I very much sympathize with your testimony. I understand the desire to keep things running in a family business. I 

get that, I get the hardships that you guys encounter. But let’s not 

throw the entire baby out with the bath water and say we are 

going to eliminate the estate tax, all together. 

This nation was founded on the principles that if you work hard 

and you put your sweat equity into something, everybody has an 

opportunity to earn their wealth, their status, and their privilege. 

We don’t believe in an aristocracy, or that it is a good societal thing 

for dynasties to hoard their wealth and leave the rest to fight over 

the crumbs. That is just not how this country was founded. 

But we have a paradox here in this country, where we think you 

should work hard to get where you are because work, by its very 

nature, and being productive, is very good. But, by the same token, 

everybody wants to make enough money to where they can retire 

and not have to work. And they want to preserve increasingly larger and larger chunks of their wealth. And that is why I am a little 

bit baffled why this Subcommittee is focusing on our time on how 

we can be doing more, quite frankly, for that last .15 percent of 

Americans. 


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But, you know, maybe I shouldn’t be that surprised. After all, we 

have seen proposals in the federal budget that gut anti-poverty programs affecting the most vulnerable in our society, seniors, children, and people with disabilities. 

And there has been a long debate—we have had several debates 

in the preceding two congresses—over means testing eligibility for 

a variety of programs that help poor and low-income families. We 

all agree that our federal dollars are valuable, they are scarce. And 

means testing can be a tool in helping to make sure that federal 

dollars are being spent in the most efficient way, and targeted to 

the populations that are truly deserving and most in need. 

But one of the more recent Republican priorities has been a drug 

test as a precursor to some of these means-tested programs. Drug 

testing is an irrelevant requirement with respect to whether or not 

a person is poor enough to qualify for help in feeding her family, 

and yet they want to add those additional burdens on to folks that 

need help the most. And that is done under the guise of protecting 

the integrity of those programs, as a way to weed out those who 

are truly deserving from that benefit, and those who aren’t. And, 

again, that is the issue of drug testing. 

I find it interesting that some of those same rules don’t apply to 

the scarce federal dollars that are being talked about today to be 

used for additional tax cuts, again, for people who are not just 

scraping to get by. And one current example is—you know, I am 

a working mom—a single mother who works to make ends meet. 

Why is it that she should be drug tested—which is an unrelated 

requirement—to receive assistance, food assistance, to make sure 

that her family has enough to eat, and people who are lucky 

enough to inherit millions of dollars are literally required to do 

nothing to get the federal tax benefit with their inheritance? 

So, my first question is for Professor Madoff. You are an expert— 

I am sorry. You are an expert on estate tax law, and you write the 

legal practice guides that most estate planners use in order to do 

estate planning. What work requirements are there to inherit up 

to $10 million tax-free? 

Ms. MADOFF. There are no requirements to get that benefit 

under the law. We have a preference in our tax system for inherited wealth over wealth earned by wages, so that somebody who inherits 10 million pays no inheritance taxes, they pay no income 

taxes. They pay no payroll taxes. 

And, moreover, they don’t even have to tell the Federal Government that they have received $10 million. The government seems 

not to be interested in those flows of wealth, even if that were to 

come from a distant relative, you know, money lands on your lap— 

lucky you, you get it. It is the only income that we don’t subject 

to tax. It is, you know, very—we have a very broad definition of 

income, and it is very odd that we just give inherited wealth a free 

pass. And if we repeal the estate tax, then it is completely free— 

it makes no sense at all. 

Ms. SA ́ NCHEZ. Professor Madoff, is there any really good—if I 

could just ask this question, and I will take the answer in writing—is there really any good policy reason for a bias that is in 

favor of inherited wealth, versus the wealth that an individual accumulates through their own hard work and sweat and tears? 


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Ms. MADOFF. I don’t think so. 

Ms. SA ́ NCHEZ. Thank you. I yield—— 

[The prepared statement of Ms. Madoff follows:] 


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f 

Chairman REICHERT. Well, that is quick and short, thank you. 

Mr. Paulsen, you are recognized. 


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Mr. PAULSEN. Thank you, Mr. Chairman. Boy, some really 

great testimony. I just really appreciate hearing your perspective, 

your story, your real-world experience of what you are having to 

live with, and the successes you have built. 

You know, you hear a lot of statistics about how the estate tax 

might only affect large companies or businesses, and maybe just a 

few wealthy individuals. But I can certainly tell you that is not the 

case of the folks I have talked to, some family businesses in Minnesota similar to what you have expressed today. I have spoken to 

Minnesota farmers; I spoke to Minnesota family business owners 

who have had their family livelihoods threatened with the death 

tax right on the horizon. 

I remember I met with an individual just two weeks ago, and he 

has got millions of dollars locked up that he would love to invest 

that capital to hiring more people, jobs, et cetera, expansion, but 

he has got to work with the Tax Code, he has got to plan for the 

future, all these accounts, all these lawyers, and then plan for all 

these contingency plans, and it is just sitting on the sidelines. 

And, you know, there is one company, Ms. Madonia, it is a company that is just like yours. And it is Johnstone Supply. It is an 

HVAC company in Minnesota, equipment wholesaler in Bloomington. It is a prime example of how detrimental this tax can be 

for family business. And, unlike a lot of large corporations, it is 

these small businesses that have a high level of assets, but a very 

low level of liquidity. Right? Farming is the exact same situation. 

And Johnstone, for example, they own a few buildings, they carry 

that high level of inventory, but it has relatively little working capital. 

But when the family started looking at transferring ownership to 

the next generation, they realized that they were going to have to 

pay—they were having huge liquidity problems when it came to 

paying these estate taxes. And they found that the only way that 

they were going to be able to afford the taxes was to sell off a portion of the business, or to purchase a substantial life insurance policy. And that, because of the uncertainty surrounding the estate 

tax—the company started about 30 years ago—they never knew 

how much life insurance was needed in order to help cover the cost 

of the tax. 

So, when it became clear how big the burden was actually going 

to be, the cost of insurance at the age of the family members was 

substantial, it was huge. And, due to the circumstances, then, the 

next generation of the family was forced to purchase this Minnesota company, which, in turn, has caused them to become highly 

leveraged, put the company at risk, and they actually consider 

themselves very lucky to have found a bank that was willing to actually do the deal. But because his family still owns some companies in some other states, they have been forced to spend about 20 

percent of their net income on life insurance to fund their future 

estate obligations. 

Now, this is money that could otherwise be reinvested in the 

company, reinvested in the business in their community, and put 

towards growing the company. But the money is locked up. And 

this isn’t a family that is trying to evade taxes. They are not trying 

to escape taxes. They simply want to keep the business afloat, and 


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in the family for other generations. And so, the Tax Code is literally forcing them, essentially, to consider breaking up the family 

business. And that is jobs lost. That is layoffs, and that is the 

wrong direction. 

So, Ms. Madonia, I just want to follow up a little bit. It brings 

me to the question of how—what options do family businesses like 

yours or like Johnstone Supply really have when it comes to the 

estate tax today? And what does repeal mean for expanding operations, for increasing sales, for creating jobs? Would it make your 

business stronger? 

Ms. MADONIA. Yes, absolutely. And, for the record, Johnstone 

Supply is also a HARDI member, so we know that—I know those 

folks well. 

Yes, the statistic about the—only affecting a small fraction of estates, I think in large part that is probably because people spend 

a lot of money trying to figure out how to preserve their company 

without having to pay that tax. So, if you—I don’t have a number. 

I wish I had a number. I wish there was some way to kind of capture that statistic on how much money is spent every year on hiring accountants and lawyers to try and figure out how you could— 

how you can, you know, pass your company on. 

In our case, I know that we sit on a lot of cash, and we do that 

purposefully, because my dad is in his seventies. And, while it 

wouldn’t be enough cash to pay the estate tax if we got hit with 

it, it would help us a little bit. And that money could very easily 

be used to hire more people, to start a new branch, to get into new 

equipment lines, or add another vendor to our list of preferred vendors. It could be used for a lot of things. Buy more trucks. And it 

is not being used for that, because it is sort of earmarked as ‘‘just 

in case’’ money. 

Mr. PAULSEN. And what really comes out in your testimony? I 

think of your father sitting around the table, planning for the future. It is not about some aristocracy, or passing this on for family 

wealth. It is about keeping a company afloat, and living that American Dream for other generations and for other—having many more 

jobs, many more employees. That is a big part of our economy, that 

is the engine of our economy, is many small businesses, just like 

yours. 

Ms. MADONIA. Yes. 

Mr. PAULSEN. I yield back, Mr. Chairman. 

Chairman REICHERT. Thank you. Mr. Kelly, you are recognized. 

Mr. KELLY. Thank you, Mr. Chairman. I thank you all for testifying. I never sat in those seats, but I have sat in something similar to yours. First of all, Ms. Madonia, we are not talking about 

passing on your estate to Madonna, the singer. We are talking 

about Karen Madonia, who is in a business. 

And, Mr. McKnight and Mr. Whitt, in addition to what you are 

doing on an everyday basis—I am an automobile dealer—you are 

also tax collectors, aren’t you? You guys, when you pay people 

wages, whether it is the mechanic that worked on your car, or 

somebody that works in your fields, or somebody that works on 

your farm equipment, or somebody that does whatever they do for 

it, don’t you pay wage taxes? Yes. So, we collect taxes. I just wish 


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it was only double taxation. I could live with being taxed twice. I 

can’t live with being taxed to death, and then even—you can’t even 

die without paying taxes, because of a government that can’t stop 

spending your money. 

And so, when we talk about this great loss of revenue, what we 

are talking about is leaving the money in the pockets of the people 

who earned it, not the people who burned it. And I am just—I am 

fascinated, as you go through this—how—look at 208 years your 

family has been in this business. The contributions to your community over the years? I don’t think you could put it in dollars and 

cents, could you? 

Just in some of the taxes, just talk about some of the taxes you 

pay. 

Mr. WHITT. Well, of course, obviously, our business is small, we 

don’t employ a whole lot, but we—give you an example—we sell 

over a quarter million dollars of pork products a year that we pay 

sales tax on. We pay sales tax for all the products that we sell out 

of our retail locations. We pay our employees’ payroll taxes. So, you 

know, it is not like we are sitting back, raking in the money, and 

never paying any taxes out. 

And it would be fascinating to go back and see the benefit that 

our family businesses had on Murfreesboro, the town of 

Murfreesboro, over the last 208 years. 

Mr. KELLY. But just in—you don’t really consider yourselves one 

of the privileged one percent, do you? 

[Laughter.] 

Mr. WHITT. Well—— 

Mr. KELLY. I mean I see—here every day I see divide, divide, 

divide, divide. It is always, ‘‘the wealthy, the wealthy, the wealthy.’’ 

And I watch what you are doing. I got to tell you, this is incredible, 

the amount of income, the amount that you put back into your 

communities. I mean, what you have done, over 208 yards—years, 

the Batey Farms have employed people, have paid federal withholding tax, have collected taxes, wage taxes that—by the way, Social Security, Medicare—all of those things are collected by you and 

then sent to the government for their distribution. 

Mr. McKnight, same thing. You are seventh generation. 

Mr. MCKNIGHT. Yes. And just to tell you a little about our 

story, about the time I got out of college, certainly not familiar with 

the estate tax, but my grandfather and great-uncle were the principals in our family business. My father and aunt were—the uncle 

had no children, so basically it was like they had two fathers. 

About the time I got out of school, my grandfather passed away, 

followed by my great-uncle’s dad, followed by my grandmother’s 

death a little later. My dad contracted Parkinson’s during this 

time, and we lost him in 2004. 

So, basically, the first 24 years of my working career there was 

never a day I didn’t have to deal with the estate tax, planning it. 

It was—basically, I was a government employee with no benefits, 

you know? And during those 24 years I watched two-and-a-half 

generations of hard work, sweat, and savings evaporate. And that 

wasn’t enough. We had to go in and liquidate twice. And in a cattle 

operation, those liquidations are very risky. We were able to get 

through it, but we had good weather, and we made it through that. 


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But even at that point, there was still a liquidity problem, and that 

is when we had the layoffs. 

And, unfortunately, I think a lot of these layoffs are the forgotten 

casualty of this punitive tax. And the biggest expense, though— 

again, I got out of school. I didn’t come home to grow smaller. We 

came home to get bigger. We wanted to be part of the solution, not 

the problem. The loss of opportunities in those 24 years, I can’t 

enumerate that. And the last six years is the first time I have had 

the freedom to go to work and just concentrate on our family business. 

Again, I don’t know what the positive aspects of this tax are. 

Mr. KELLY. Well, it is becoming very unpatriotic to die. 

[Laughter.] 

Mr. KELLY. Because at that point you go off the tax rolls. We 

found a way to even get to you after you are laid to rest. 

Ms. Madonia, I mean, tell me. I mean, your story is the story of 

so many people across America. And I am serious about this. We 

keep talking about the super-wealthy. Mr. Paulsen hit on it. You 

talk about assets that aren’t liquid; I am an automobile dealer, too. 

So I get a little bit concerned about that. We have spent more time 

and more money trying to figure out how to maintain a family 

business that my dad started in 1953 after being a parts picker. 

This guy did not inherit great wealth. He worked to accumulate 

something, he passed it on. I had to buy it from him, it wasn’t left 

to me in his will, by the way, so I have been paying taxes my whole 

life. 

But—well, I know I am getting gaveled, but listen. Thank you for 

being here today. God bless you. Don’t give up the fight, because 

we are not, either. 

Chairman REICHERT. Thank you, Mr. Kelly. 

Mr. Thompson, you are recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. Thank you all 

very, very much for being here. And I really would like to dig in 

and try and solve this problem. I think we have a responsibility, 

and not to preserve millions of dollars in tax cuts for billionaires 

and the top one percent, or however it is being characterized here, 

but we have a responsibility to make sure the estate tax works in 

a way that protects the people who create jobs and the family farmers, and even the family business owners. 

I have carried legislation in this Congress—matter of fact, the 

first bill I introduced when I was elected to Congress in 1998 was 

a bill to address this issue. And I am getting ready to reintroduce 

it again, the Family Farm Preservation and Conservation Tax Act, 

that would exempt family farms from paying estate tax if the farm 

continues in the family, and continues to be farmed. 

You know, if you sell it or rent it out and go live on the beach 

in Hawaii, then, you know, we ought to tax you. But we do need 

to figure out a way to preserve valuable farm land. We are losing 

it by way too much every day. We are losing ag land while we are 

sitting here today. 

And I was particularly impressed, Mr. Whitt, with your testimony. You brought up a lot of the issues that I bring up when I 

talk about my bill: the cost associated with protecting your family 

farm from being lost; the loss of ag land to development; the idea 


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that young farmers—we are losing young farmers. And if we don’t 

do something about estate tax and how it impacts family farms, we 

are going to lose more. And I don’t think we want to do that. So 

I am very encouraged by the committee having this hearing. 

I hope we can get away from the rhetoric. It is not death tax, 

it is estate tax. And I think that was a very clever political strategy, but I think it has backfired, and it has hurt us in trying to 

resolve this very, very real problem. 

Ms. Madoff, I have got some questions for you. You are a tax attorney, correct? 

Ms. MADOFF. Mm-hmm. 

Mr. THOMPSON. Is there anything in the Tax Code that is—refers to death tax? Is there a ‘‘death tax’’? 

Ms. MADOFF. No, there isn’t. 

Mr. THOMPSON. Does anybody pay taxes after they die? 

Ms. MADOFF. No. 

Mr. THOMPSON. Okay. So you don’t get called for jury duty. 

You are dead, you are dead. 

Ms. MADOFF. As they say in the Country-Western song, you 

know, ‘‘They don’t have luggage racks on hearses.’’ 

Mr. THOMPSON. Yes, exactly. I think it is important to establish that, and delve into the policy, rather than the politics. 

Do you think that, short of repeal, that there is a way that we 

can target a solution to deal with this issue? 

Ms. MADOFF. Absolutely. And the legislation is already there on 

our books. It has been—it is not currently active, but Sections [sic] 

2057 could address all businesses, and Section 2032a could address 

farmers. 

And I think it is really important for this body to be aware that 

every single one of these witnesses would be better off with a targeted exemption than with repeal of the estate tax, and here is 

why. 

Mr. THOMPSON. Well—— 

Ms. MADOFF. It—oh, sorry. 

Mr. THOMPSON [continuing]. We get it. 

Ms. MADOFF. Okay, but—— 

Mr. THOMPSON. I would like to give you a copy of my legislation I am going to be introducing in the next week or so, and I 

would like to get your feedback on that. 

Mr. Whitt and Mr. McKnight, I have a question for you, for both 

of you. If total repeal of the estate tax isn’t politically feasible, are 

you supportive of finding a way to protect the capital assets of family farmers and ranchers so their family farms can continue? Are 

you willing to forgo those protections until, if ever, the estate tax 

is fully eliminated? 

Mr. WHITT. That is a loaded question—— 

Mr. THOMPSON. It was pretty straightforward. 

Mr. WHITT [continuing]. To be honest with you. And, you know, 

I really believe that targeted legislation, it sounds good on the forefront, and maybe we can help out, but there are a lot of rules that 

come along with that. 

Mr. THOMPSON. This would be pretty straightforward. It would 

say that you—if your father-in-law passes away and leaves you and 


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your wife the farm, as long as you continue to farm it, you would 

be exempt from paying any taxes, any estate taxes. 

Mr. WHITT. If it is that simple. 

Mr. THOMPSON. Yes. So you would support something like 

that? 

Mr. McKnight, would you? 

Mr. MCKNIGHT. Again, something to look at. I think the devil 

is in the details. How do you treat a rancher maybe that has gone 

out and invested in another business? Or maybe they are expanding through their—— 

Mr. THOMPSON. I am just talking about the family farms. Family farms. 

Mr. MCKNIGHT [continuing]. Again, if this were just—again, I 

think it is very complicated. The devil would be in the details—— 

Mr. THOMPSON. Pretty straightforward. 

Mr. MCKNIGHT. Okay. 

Mr. THOMPSON. Let me—— 

Mr. MCKNIGHT. If a guy has got multiple businesses—you are 

saying he would be exempt from the tax, or he would have to 

pay—— 

Mr. THOMPSON [continuing]. It would be your family farm that 

would be exempt from the tax. If you own a family farm, and you 

have a bucket of gold, you still pay the estate tax on the bucket 

of gold. 

Mr. MCKNIGHT [continuing]. Right. 

Mr. THOMPSON. But the family farm would be protected, if you 

keep farming. 

Mr. MCKNIGHT. I think the devil would be in the details, how 

that was written. 

Mr. THOMPSON. Let me ask you. On—the American Farm Bureau policy manual states on page 152, ‘‘If the’’—— 

Chairman REICHERT. The gentleman’s time is expired. 

Mr. THOMPSON [continuing]. Mr. Chairman, I would like to 

submit for the record the policy of the American Farm Bureau, and 

the policy of the NCBA, as it relates to this issue. 

Chairman REICHERT. Without objection. 

[The information follows:] 


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Mr. THOMPSON. Okay, thank you. 

Chairman REICHERT. Mr. Renacci, you are recognized. 

Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the 

witnesses for being here. It is interesting, because, as I sat here 

and listened, there were times my blood pressure went up and 

times my blood pressure came down. I am a—was a small business 

owner, so I appreciate what you all have done. I also am a CPA, 

and I also have done estate tax planning. So I have seen it from 

all avenues, and I understand the issues that you are facing. 

And this, really, this hearing is about two things, in my opinion. 

It is about the orderly transfer of business interests upon death, 

and it is also about double taxation. I think those are the keys we 

should be zeroing in on. 

It is interesting, some of the issues that were brought up. You 

know, there was talk that inheritance isn’t taxed. I heard one of 

the witnesses say that. Those are the exemptions of the inheritance. That is part of the exemption of the amount. But, you know, 

that is the rhetoric that we continue to hear, because there is also 

income that is not taxed, and that is because of the exemptions 

that you have on income tax. So there are pieces of taxable income 

that are not taxed. So, I just use that as we got to watch what we 

say when we say inheritance isn’t taxed, because there is income 

tax. There is income that is not taxed. There is all kind of ways 

we can talk about this and look at this. 

But—and this hearing really isn’t about Soros, Gates, Buffett, or 

Hilton, because, quite frankly, Soros, Gates, Buffett, and Hilton 

probably will not pay very much estate tax, because they have 

probably done enough things, whether it is through dynasty trusts, 

foundations, family partnerships, all those other things that they 

were able to do because of their liquid assets, they are able to, in 

most cases, get around much of the estate tax that you all have to 

pay. 

The question here is how do we make sure, especially when it 

comes to small businesses and family businesses, how do we make 

sure that there isn’t a burden placed on you upon the—and, again, 

when we talk about words, I mean, we say that there is no death 

tax. No, there is—upon death there is an estate, and upon the estate there is a tax. So the question is how you want to talk about 

it. 

We can get rid of all this rhetoric, and just really get down to 

the basics. How do we make sure that, in the long run, a business 

can survive and sustain itself and move forward? And I think if we 

do that—and I am glad to hear many of my colleagues on the other 

side are talking about ways of doing that. How can we get that accomplished? Because it is too many times where I have seen, back 

in my district, back in Ohio, where people with a small farm or 

with a small business, upon the death of someone, and the estate, 

and the estate tax, are not able to continue the business, because 

the business has to go up for sale because of the fixed assets, because of the buildings, because of the assets that are there, because 

of the farm land being valued at a certain level, all of those things. 

So, I think it is important that we look at this issue. But, at the 

same time, I also believe there is a double taxation, because I have 

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ness sells, they pay their tax, that individual now has liquid assets, 

and then, upon his death, those liquid assets go into an estate, and 

then those estate assets are then taxed at almost a 50 percent rate, 

and they are double-taxed. 

Now, the question is, should the Federal Government be able to 

take those dollars? And should the Federal Government be able to 

be part of that double taxation? 

Or, the better question is, should value continue to be passed on 

from family to family to family at a—I mean the—again, now I will 

go back to Soros, Gates, Buffett, and Hilton. I guarantee you those 

individuals, if you know—— 

Mr. NEAL. Will the gentleman yield? 

Mr. RENACCI [continuing]. I will, but not right now. But if you 

take Paris Hilton, the daughter, quite frankly, she is getting a lot 

of money somehow from her family. So—— 

Mr. NEAL. Thank you very much. 

Mr. RENACCI [continuing]. But I will yield. 

[Laughter.] 

Mr. RENACCI. But, anyway, so, again, this continues to be a discussion about how we fix the problem, and how we take care to fix 

that. 

And, again, I could ask every one of the three of you—I mean I 

am sure you have all purchased fixed assets in the farm. I was the 

CPA for three farms. I understand the business. You probably 

have—I mean what is the cost of—what is—give me a cost of one 

of your pieces of equipment in your farm. A big one, a big one. A 

big—— 

Mr. WHITT. The last combine price, $340,000. 

Mr. RENACCI [continuing]. Absolutely. So you got 340,000 tied 

up in this. You got this large amount tied up in your land. All the 

sudden there is a death, then there is an estate, and there is taxation. How do you come up with those dollars? How are you planning on coming up with those dollars? 

Mr. WHITT. By growing the business. How does a small farm 

continue to be a small farm, with the increased values that we are 

having to pay for the equipment, the expenses that we incur on 

that farm? The only choice we have is to grow, to have more 

growth sales to compensate. We don’t really make much money off 

of the products that we sell. The margins are very low. So how do 

we increase that? We sell more. We have to grow more to be able 

to purchase these things, just to run the business. It takes a combine—I don’t think any of us want to go back out to the field and 

start hand-picking our crops. We will become very inefficient at 

that point. 

Mr. RENACCI. Thank you. My time is—I yield back. 

Chairman REICHERT. The gentleman’s time is expired. Mr. 

Brady is recognized. 

Mr. BRADY. Thank you, Chairman Reichert, for permitting me 

to participate in today’s important hearing. I want to thank the 

witnesses, as well. Very helpful, including my fellow Texan, Bobby 

McKnight. Like many of you, I have been fighting to permanently 

repeal the death tax since my constituents first sent me here to 

Congress. 


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And I would like to echo a very important point made this morning. This tax is not about reducing income inequality. The superrich have a legion of lawyers and all the resources in the world. 

It is not the super-rich that pay this tax; it is the people who are 

at the table today who pay this tax. This is the number-one reason—death tax is the number-one reason family-owned farms and 

businesses aren’t passed down to the next generation. The numberone barrier. It is the farmer, the rancher, the courageous entrepreneur, family-owned business, whose assets are tied up in buildings and machines and property tax that pay the death tax. It is 

their spouse and children that have to sell the business, or parts 

of it, just to pay Uncle Sam. 

One Texas rancher I have known for a long time has paid the 

death tax three times. Her grandfather started their Texas cattle 

ranch in 1970, just a year after this tax was created. In 2011, her 

husband passed away suddenly in a tractor accident. The price of 

hay was outrageous because of the drought. Diesel costs were way 

up. She had no idea how she was going to continue the ranch. And 

the IRS swooped in, and forced her to sell huge chunks of cattle 

stock, just to pay the death tax, all the while she and her children 

are mourning the loss of their husband and father. Try telling that 

family they are like Paris Hilton, exactly. 

A former staffer, a young woman staffer of mine returned to her 

family ranch in Texas recently after her aunt passed away to help 

sell her estate. This was a ranch that her great-great grandfather 

had settled in the 1800s. She and her brother were able to keep 

that ranch. Guess how? They merely had to sell two-thirds of the 

ranch to keep it. So tell this young woman she is exactly like the 

robber barons of the Teddy Roosevelt-years. 

The death tax is an immoral tax. And it is an attack on the 

American Dream. It disproportionately hurts small businesses and 

start-ups. They have already paid, as Mr. Renacci and others have 

pointed out, very high rates on it to begin with, and Uncle Sam 

swoops in and takes 40 percent of the nest egg they have built a 

lifetime trying to put together. 

And what is worse is that this tax is especially destructive to 

women and minority-owned businesses, the fastest-growing sector 

of our economy today. Harry Alfred, the president and CEO of the 

National Black Chamber of Commerce, goes as far as calling this 

tax, in his words, ‘‘a black tax,’’ because of its destructive effect on 

black-owned small businesses. 

A study by two Boston College professors, Professor Madoff, several years ago estimated that between 2001 and 2055, the first half 

of this century, the death tax will wipe out between 11 and 15 percent of all African American wealth, 11 and 15 percent of all African American wealth wiped out by this tax. This one tax alone 

these Boston College experts said would cost African American 

households between $192 billion and $257 billion. This is not a 

decoy for the wealthy. These are real people. 

And imagine what that money could do if it was invested in education and businesses and jobs. 

So, as Members of Congress, I think we are tasked with making 

our great country better, with ensuring that we leave our children 

a better nation than the one we received. The death tax, I think, 


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Mr. Chairman, betrays that oath. And so I urge my colleagues to 

work with me in eradicating this immoral tax once and for all. 

I know you have been given some bits and pieces. ‘‘What if we 

do this to satisfy you?’’ And, ‘‘What if we just sort of buy you out 

of this thing?’’ But the point is that Washington will pick winners 

and losers among people who have built wealth, and that is wrong. 

And, by the way, after the agreement was reached on the current 

estate tax levels, the President immediately turned around and 

began lowering those exemptions and raising those rates. And so, 

whatever you are promised today I guarantee you won’t be there 

tomorrow. 

So, Mr. Chairman, thank you very much for having me here 

today. 

Chairman REICHERT. Thank you, Mr. Brady, and thank you for 

your hard work on this issue, and thank you for the work you put 

in to your piece of legislation. Thanks for being patient and staying 

with us today, and offering your comments. 

And just before we end the hearing—— 

Mr. NEAL. Give me one—— 

Chairman REICHERT [continuing]. Oh, I am sorry. We have one 

more for Mr. Neal. 

Mr. NEAL [continuing]. Thank you. Just—and thank you, Mr. 

Chairman, very helpful—— 

Chairman REICHERT. Quick question from Mr. Neal. 

Mr. NEAL [continuing]. Yes. Ms. Madoff, just to follow up on 

what Mr. Thompson said, is there a good way to exempt family 

farms and small businesses from the estate tax? And would you develop and offer a better approach? And why? 

Ms. MADOFF. Absolutely. And it would be much better for all 

of these witnesses. So let me explain what it is. 

Section 2057 was a short-lived provision that provides—that was 

designed to provide benefits, but could be made into a complete exemption for family businesses and farms. Section 2032A would be 

for land. And the reason that this would be more valuable for all 

of these witnesses is because this body only controls the federal tax 

system. But, increasingly, states are turning to their own state estate tax systems, and they model them on the federal definition of 

the gross estate. 

And so, these organizations, if you repeal the federal estate tax, 

they would continue to be vulnerable to possibly being taxed under 

the state estate tax systems, which are in more than half the 

states. But if you provide an exemption for the definition, an exclusion from the gross estate, they would be protected from their 

states. And so it is very important. An exemption would be much 

more valuable for every single one of these witnesses. And I agree 

that they should all be protected. And they can easily be protected 

by Section 2057. 

And you have to remember this only applies to eight percent of 

the assets. Studies—numbers just came out. Eight percent of the 

assets are small business assets, ninety-two percent are other assets. So the numbers—we should not throw out the whole system 

because of eight percent. This eight percent is an important part 

of our economy, and should be addressed, and can be, easily and 

fairly. 


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Chairman REICHERT. Thank you for your—— 

Mr. NEAL. Thank you, Mr. Chairman. 

Chairman REICHERT [continuing]. Thank you, Mr. Neal. Thank 

you, Ms. Madoff. 

Mr. Reed, you are recognized. 

Mr. REED. Thank you, Mr. Chairman. And, as with Mr. Renacci, 

my blood pressure has gone up and down during the testimony 

here today. 

But I will start with this. I am getting sick and tired of folks 

down here blasting the American charitable spirit. You know, as I 

am sitting, listening to the testimony, I just Googled Warren Buffet. Do you know how much money he has estimated to be giving 

away? $37.4 billion. See? 

And so, Ms. Madoff, I appreciate your Utopic commitment to the 

government bureaucracy of D.C. to be able to magically acquire all 

this money that people have earned over a lifetime, and will go to 

Washington, D.C. to then have D.C. ferret out where it is going to 

go amongst the masses of the 300 million Americans that we call 

our fellow citizens. 

I believe Mr. Whitt and his family, they worked hard. Who owns 

your property? 

Mr. WHITT. My father-in-law. 

Mr. REED. Your father-in-law. You, right? Not the government. 

When you are done with your use of that land, that is a fundamental principle that we hold in America. You own that property. 

You earned that property. 

And if you choose to do what I think the American spirit and our 

fellow Americans do on a regular basis, it is amazing to me how 

much our fellow citizens are charitable. You look at Bill Gates. 

Look at Andrew Carnegie, one of the robber barons that was potentially referenced to previously in some of the testimony. What did 

Carnegie do? Carnegie invested tremendous amounts of money into 

our society, into our American society, and did some very positive 

things. 

Now, I am not going to defend every single American who may 

have ulterior motives and has an evil heart. But I will tell you the 

vast majority of Americans I know, they are good people. They are 

charitable people. And it frustrates me that we have a tax system 

that is essentially going to say, ‘‘When you die, yes, we taxed your 

entire lifetime, but you are going to pay one more.’’ How is that 

fair? 

The question you keep raising, Ms. Madoff, in your testimony, or 

your written—is a question of fairness. I would throw that back at 

you and say, ‘‘How is it fair that Washington, D.C. takes your property and makes you pay a tax on it at your death?’’ You have 

earned that property. 

So, as we have this conversation—— 

Mr. NEAL. Mr.—— 

Mr. REED [continuing]. I just—— 

Mr. NEAL [continuing]. Will the gentleman yield? 

Mr. REED [continuing]. Sure, I will yield a minute. 

Mr. NEAL. If you—to throw it back at her, would you let her answer? 


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Mr. REED. Well, I have listened to hours, and read her testimony. And I understand where she is going to come from on her 

testimony. And, Ms. Madoff, it is no personal disrespect to you, but 

you represent a philosophy that is very frustrating to me, a philosophy that your testimony speaks loud and clear to, ma’am. And it 

is a philosophy that I came to Washington in 2010 to fight, is that 

I trust the individuals more to do with their property what is right. 

And when they work their entire lifetime, when I talk to my family farmers back in Western New York, and they are there on the 

eighth, seventh, sixth generation, and they are telling me, ‘‘You 

know what? When my father dies, I am going to have to carve up 

my farm to pay the tax bill’’—because land isn’t cash. That 

$340,000 combine that you paid—that is not cash. And if you have 

a bill that goes to the government, they want cash. Uncle Sam 

doesn’t take a combine and say, ‘‘Call it even.’’ He wants cash. And 

so that is the problem. 

And then, you know what also happens? I have seen it in the 

eyes of my constituents. I have seen it in their eyes, when they say, 

‘‘You know what? I have to carve up my property in order to pay 

for this tax bill.’’ And you know what happens? Farming. Do you 

do farming because you want to be a multi-millionaire, Mr. Whitt? 

You are going to be a robber baron of the 21st century of making 

that big mega-farm across America? Why do you do farming? 

Mr. WHITT. Because it is an action of servitude to my fellow 

man. 

Mr. REED. Amen. It is a way of life. It is a way of life. And when 

I see the tears in the eyes of my constituents who say, ‘‘All I want 

to do is just go out and work my land’’—‘‘All I want to do is build 

my inventories in my HVAC company that’’—I believe you have an 

HVAC company, right? That is all they want to do. 

But, no. What we are going to say is we in Washington know 

what is best to do with that money that you have earned over your 

lifetime. Send it to Washington, and then we will sprinkle it among 

the masses. I would trust Ms. Madonia, I would trust Mr. 

McKnight, and I would trust Mr. Whitt to take care of his fellow 

man in his community, in his back yard, rather than have this taxation system that you are talking about, Ms. Madoff. 

Ms. MADOFF. I am sorry; I guess I didn’t make my testimony 

clear, because I agreed with you, that none of these people should 

have to pay an estate tax for their family businesses, so I entirely 

agree with you. 

Mr. REED. But you are going to—reclaiming my time—you are 

going to draw the line, and somebody is going to pay for it. 

And even the people that are the robber barons, like the Andrew 

Carnegies, just like Warren Buffett, $37.4 billion of his money 

going to better our fellow American citizens. And that is the American spirit that I love and I am committed to. And with that, I yield 

back. 

Chairman REICHERT. The gentleman’s time is expired. 

While I was the chairman of the Human Resources Subcommittee prior to coming to the Tax Committee subcommittee, 

this is almost more emotional and compassionate than the human 

resources. I didn’t think taxes were going to get this exciting, but 


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you can tell that there is—there are strong feelings on both sides 

of the aisle. 

I think that you also sensed, as witnesses today, that both sides 

really understand the issue that you are dealing with, the taxes, 

the decisions that you have to make, and I think there was some 

agreement here that we need to do something. 

Now, there is disagreement as to how and what, and I noticed 

that, you know, as Mr. Thompson talked about his bill, he asked— 

his piece of legislation—Mr. Whitt and Mr. McKnight how they felt 

about it, but he didn’t ask Ms. Madonia. And I would imagine that 

her answer would be a little bit different, since that bill only addresses family-owned farms. There are other businesses out there 

that, frankly, as we have heard today from Ms. Madonia, that are 

affected by the estate tax, or death tax, however you want to refer 

to it. 

So, I am going to come away with—this first experience as the 

chairman of this Subcommittee—with a positive feeling that most 

of us on the committee feel like we need to do something. And we 

are going to continue to work on this. And, again, I congratulate 

Mr. Brady on his bill. 

And so, today, that concludes our hearing. And I must advise 

that Members may submit written questions to the witnesses. 

Those questions and the witnesses’ answers will be made a part of 

the record. 

Again, I would like to thank all the witnesses for being here 

today. Thank you for taking time out of your busy schedules, away 

from your families and your businesses, and thank you all for your 

testimony. The committee stands adjourned. 

[Whereupon, at 11:35 a.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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