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106TH CONGRESS

1ST SESSION S. 77

To increase the unified estate and gift tax credit to exempt small businesses

and farmers from estate taxes.

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

Mr. LUGAR (for himself, Mr. HAGEL, Mr. ROBERTS, and Mr. HELMS) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To increase the unified estate and gift tax credit to exempt

small businesses and farmers from estate taxes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Farmer and Entre5 preneur Estate Tax Relief Act of 1999’’.

6 SEC. 2. FINDINGS.

7 Congress finds the following:

8 (1) The economy of the United States cannot

9 achieve strong, sustained growth without adequate

10 levels of savings to fuel productive activity. Inad-
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1 equate savings have been shown to lead to lower pro2 ductivity, stagnating wages and reduced standards

3 of living.

4 (2) Savings levels in the United States have

5 steadily declined over the past 25 years, and have

6 lagged behind the industrialized trading partners of

7 the United States.

8 (3) These anemic savings levels have contrib9 uted to the country’s long-term downward trend in

10 real economic growth, which averaged close to 3.5

11 percent over the last 100 years but has slowed to 2.4

12 percent over the past quarter century.

13 (4) Congress should work toward reforming the

14 entire Federal tax code to end its bias against sav15 ings.

16 (5) Repealing the estate and gift tax would con17 tribute to the goals of expanding savings and invest18 ment, boosting entrepreneurial activity, and expand19 ing economic growth. The estate tax is harmful to

20 the economy because of its high marginal rates and

21 its multiple taxation of income.

22 (6) The repeal of the estate tax would increase

23 the growth of the small business sector, which cre24 ates a majority of new jobs in our Nation. Estimates

25 indicate that as many as 70 percent of small busi-
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1 nesses do not make it to a second generation and

2 nearly 90 percent do not make it to a third.

3 (7) Eliminating the estate tax would lift the

4 compliance burden from farmers and family busi5 nesses. On average, family-owned businesses spent

6 over $33,000 on accountants, lawyers, and financial

7 experts in complying with the estate tax laws over

8 a 6.5-year period.

9 (8) Abolishing the estate tax would benefit the

10 preservation of family farms. Nearly 95 percent of

11 farms and ranches are owned by sole proprietors or

12 family partnerships, subjecting most of this property

13 to estate taxes upon the death of the owner. Due to

14 the capital intensive nature of farming and its low

15 return on investment, farmers are 15 times more

16 likely to be subject to estate taxes than other Ameri17 cans.

18 (9) As the average age of farmers approaches

19 60 years, it is estimated that a quarter of all farm20 ers could confront the estate tax over the next 20

21 years. The auctioning of these productive assets to

22 finance tax liabilities destroys jobs and harms the

23 economy.

24 (10) Abolishing the estate taxes would restore

25 a measure of fairness to our Federal tax system.
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1 Families should be able to pass on the fruits of the

2 labor to the next generation without realizing a tax3 able event.

4 (11) Despite this heavy burden on entre5 preneurs, farmers, and our entire economy, estate

6 and gift taxes collect only about 1 percent of our

7 Federal tax revenues. In fact, the estate tax may not

8 raise any revenue at all, because more income tax is

9 lost from individuals attempting to avoid estate

10 taxes than is ultimately collected at death.

11 (12) Repealing estate and gift taxes is sup12 ported by the White House Conference on Small

13 Business, the Kemp Commission on Tax Reform,

14 and 60 small business advocacy organizations.

15 SEC. 3. INCREASE IN UNIFIED ESTATE AND GIFT TAX CRED16 IT.

17 (a) IN GENERAL.—The table in section 2010(c) of

18 the Internal Revenue Code (relating to applicable credit

19 amount) is amended—

20 (1) by striking ‘‘2000 and 2001’’ and inserting

21 ‘‘2000 or thereafter’’,

22 (2) by striking ‘‘$675,000’’ and inserting

23 ‘‘$5,000,000’’, and
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1 (3) by striking all matter beginning with the

2 item relating to 2002 and 2003 through the end of

3 the table.

4 (b) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to the estates of decedents dying,

6 and gifts made, after December 31, 1999.

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