I
105TH CONGRESS
1ST SESSION
H. R. 1684
To increase the unified estate and gift tax credit to exempt small businesses
and farmers from inheritance taxes.
IN THE HOUSE OF REPRESENTATIVES
MAY 20, 1997
Mr. SOUDER (for himself, Mr. ENGLISH of Pennsylvania, Mr. WATTS of Okla-
homa, Mr. CHABOT, and Mr. HOSTETTLER) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To increase the unified estate and gift tax credit to exempt
small businesses and farmers from inheritance taxes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Farmer and Entre-
preneur Estate Tax Relief Act of 1997’’.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The economy of the United States cannot
achieve strong, sustained growth without adequate
levels of savings to fuel productive activity. Inad-
equate savings have been shown to lead to lower pro-
ductivity, stagnating wages and reduced standards
of living.
(2) Savings levels in the United States have
steadily declined over the past 25 years, and have
lagged behind the industrialized trading partners of
the United States.
(3) These anemic savings levels have contrib-
uted to the country’s long-term downward trend in
real economic growth, which averaged close to 3.5
percent over the last 100 years but has slowed to 2.4
percent over the past quarter century.
(4) Reforming the estate and gift tax would
contribute to the goals of expanding savings and in-
vestment, boosting entrepreneurial activity, and ex-
panding economic growth. The estate tax is harmful
to the economy because of its high marginal rates
and its multiple taxation of income.
(5) The reform of the inheritance tax would in-
crease the growth of the small business sector, which
creates a majority of new jobs in our Nation. Esti-
mates indicate that as many as 70 percent of small
businesses do not make it to a second generation
and nearly 90 percent do not make it to a third.
(6) Reforming the inheritance tax would lift the
compliance burden from farmers and family busi-
nesses. On average, family-owned businesses spent
over $33,000 on accountants, lawyers, and financial
experts in complying with the estate tax laws over
a 6.5-year period.
(7) Reforming the inheritance tax would benefit
the preservation of family farms. Nearly 95 percent
of farms and ranches are owned by sole proprietors
or family partnerships, subjecting most of these es-
tates to inheritance taxes upon the death of the
owner. Due to the capital intensive nature of farm-
ing and its low return on investment, many farm es-
tates do not have the necessary liquidity to meet
their estate tax liability and are forced to sell their
land.
(8) As the average age of farmers approaches
60 years, it is estimated that a quarter of all farm-
ers could confront the inheritance tax over the next
20 years. The auctioning of these productive assets
to finance tax liabilities destroys jobs and harms the
economy.
(9) Reforming the inheritance taxes would re-
store a measure of fairness to our Federal tax sys-
tem. Families should be able to pass on the fruits
of the labor to the next generation without realizing
a taxable event.
(10) Despite this heavy burden on entre-
preneurs, farmers, and our entire economy, estate
and gift taxes collect only about 1 percent of our
Federal tax revenues. In fact, the estate tax may not
raise any revenue at all, because more income tax is
lost from individuals attempting to avoid estate
taxes than is ultimately collected at death.
SEC. 3. INCREASE IN UNIFIED ESTATE AND GIFT TAX
CREDIT.
(a) ESTATE TAX CREDIT.—
(1) IN
GENERAL.—Subsection (a) of section
2010 of the Internal Revenue Code of 1986 (relating
to unified credit against estate tax) is amended by
striking ‘‘$192,800’’ and inserting ‘‘the applicable
credit amount’’.
(2) APPLICABLE
CREDIT
AMOUNT.—Section
2010 of such Code is amended by redesignating sub-
section (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes
of this section, the applicable credit amount is the amount
of the tentative tax which would be determined under the
rate schedule set forth in section 2001(c) if the amount