Providing for Consideration of H.R. 8, Death Tax Repeal
PROVIDING FOR CONSIDERATION OF H.R. 8, DEATH TAX REPEAL
PERMANENCY ACT OF 2005 -- (House of Representatives - April 13, 2005)
Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
(Mr. McGOVERN asked and was given permission to revise and extend his remarks.)
Mr. McGOVERN. Mr. Speaker, for years the Republican leadership has misled the American public about the estate tax. Today, because of that deceptive campaign, millions of Americans seem to believe they will be subject to the so-called death tax. They have been lied to.
Facts are stubborn things, and the facts prove that the Republican leadership is once again trying to pass a bill that helps the very wealthy few at the expense of everyone else.
The truth is that the overwhelming majority of American families, 99.7 percent, are not subject to estate taxes. Let me repeat: 99.7 percent of American families are not subject to estate taxes.
The truth is that this is the wrong bill at the wrong time that helps the wrong people, and it should be defeated. This permanent repeal of the estate tax does not help the average American. Instead, it benefits the heirs of the wealthy. Paris Hilton is doing just fine. She does not need another tax cut by the Republicans.
My colleague, the gentleman from Washington (Mr. Hastings), will claim that this bill will help family farmers and small business owners pass their assets, their farms and businesses, on to their children. The reality is that most of these family farmers and small business owners are already exempt from the estate tax.
Further, as The Washington Post pointed out today, permanently repealing the estate tax may actually hurt more family farmers and small businesses than it would help because of the cumbersome new reporting requirements and changes in how assets are valued.
Let us look at the facts. Exempting estates up to $1 million, the original level before the 2001 Bush tax cut, leaves only the top 2 percent of the estates in the country. But current law goes well beyond the $1 million exemption; and to hide the real cost of their bad economic policies, the Republican leadership included a provision that sunsets the 2001 tax cut in 2011.
Mr. Speaker, for most of the 20th century, this country operated on a progressive taxation system. Those who could afford it paid their fair share. We looked out for each other. We provided food to the hungry, shelter to the homeless, assistance to the unemployed, and health care to the sick.
But the Republican leadership wants to turn that system upside down. They believe the wealthy should be exempt from paying taxes and the poor should fend for themselves. It is wrong, and we have to stop it.
Let me connect the dots for my Republican friends. They say there is a deficit and we need to tighten our belts to pay down the debt. Of course this debt is of their creation. President Bush came into his first term with a surplus and ended his second term with the largest deficit in the history of the United States of America, and now they bring forward another tax cut that costs $290 billion according to the Joint Committee on Taxation.
Some private groups estimate that this bill will ultimately cost closer to $1 trillion.
Where is that money going to come from? It is a credit card bill that they are passing on to our children and our grandchildren. That is the actual estate tax. That is the real legacy they are leaving to future generations.
Mr. Speaker, we are at war, but the only people being asked to sacrifice are those who can least afford it. The wealthiest of the wealthy are getting a free ride at this very difficult time in our history.
Look at the budget resolution. The Republican leadership pushed the budget resolution through earlier this month. What do they do? They cut food stamps. They cut Medicaid. They cut education programs. They cut environmental protection. They cut community development block grants. They cut school breakfasts and school lunches. Why? All so a few people can inherit a few more billion dollars tax free from their relatives.
Our colleague from North Dakota (Mr. Pomeroy) will offer an amendment that will set the exemption for estates at $3 million for individuals and $7 million for couples. This would cost dramatically less than the Republican bill, $72 billion compared to $290 billion, and it would exempt 99.7 percent of all estates from ever facing the estate tax. This is a commonsense compromise that should receive near unanimous support.
Mr. Speaker, the truth is out there, but the Republican leadership is too stubborn and too arrogant to face it. We are at war. Health care costs are spiraling out of control. Poverty in America is increasing. More Americans go to bed hungry at night. Our children are falling behind in math and science. I, for one, do not believe the answer to these challenges is a permanent repeal of the estate tax.
I urge my colleagues to do the right thing and defeat this bill.
Mr. Speaker, I reserve the balance of my time.
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
We hear the phrase ``death tax,'' which really is kind of a misnomer. There is no such thing. When I am dead, I am dead. You cannot collect any taxes from me. The issue is whether or not estates in the billions of dollars should be subject to any taxation. We are not talking about small family farms or small businesses. That is not what this is about. If you read the Washington Post today, it is very clear what this is about. It is about the most extremely wealthy companies, the most extremely wealthy people in this country.
The gentleman from North Dakota has a substitute that would basically exempt 99.7 percent of all estates from any estate tax. So let us be clear about what is going on, and let us also be clear about the cost to our kids. The Joint Committee on Taxation says that this is going to cost up to $290 billion. There seems to be no concern on the other side of the aisle about what this does to our deficit or our debt. This is not paid for. They make no attempt to pay for it.
Let me just remind my colleagues that the debt that we are faced with right now is close to $8 trillion, and the interest on that debt is astonishingly high. That is the legacy that they are passing on to our kids.
Our good colleague from Tennessee (Mr. Tanner) in a presentation, I thought, said it best. He said, so people can understand what the debt means, if you stack up one thousand dollar bills, a million dollars would be about a foot high; a billion dollars would be about the size of the Empire State Building; a trillion dollars would be 1,000 Empire State Buildings. Our debt is close to $8 trillion, and there is no outrage on the other side, there is no concern about what we are doing and what it means to our economy by making these tax cuts permanent.
I think that people need to understand what is going on here. This is not about small family farms. It is not about small businesses. This is about helping the wealthiest of the wealthy.
Mr. Speaker, I yield 6 minutes to the gentleman from North Dakota (Mr. Pomeroy).
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Let me again remind people that we are talking about three-tenths of 1 percent who actually pay an estate tax. In that category we are not talking about family farms or small businesses. We are talking about Paris Hilton, and I would say to my colleague from California that I think she has enough accountants and lawyers to be able to fill out form 706.
Mr. Speaker, I yield 3 minutes to the gentleman from Vermont (Mr. Sanders).
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Let me just make a couple of points here. This is not about protecting small businesses or family farms. I mean, I think that is clear to everybody here. This is about protecting the three-tenths of the 1 percent wealthiest people in this country.
I enter into the RECORD an article that appeared in today's Washington Post that really kind of explains what this debate is all about, about how Mars candy, Gallo wine, and Campbell soup fortunes have been lobbying for the complete repeal of the estate tax for some time so they can end all taxation on their inheritance. That is what this is about. This is not about working families. This is not small family farms or small businesses. This is about protecting the richest of the rich.
[From the Washington Post, April 13, 2005]
Erosion of Estate Tax Is a Session in Politics
(By Jonathan Weisman)
In 1992, when heirs to the Mars Inc. fortune joined a few other wealthy families to hire the law firm Patton Boggs LLP to lobby for estate tax repeal, the joke on K Street was that few Washington sightseers had paid so much for a fruitless tour of the Capitol.
Today, the House is expected to vote to permanently repeal the estate tax, moving the Mars candy, Gallo wine and Campbell soup fortunes one step closer to a goal that once seemed quixotic at best: ending all taxation on inheritances.
``I think this train has an awful lot of momentum,'' said Yale University law professor Michael J. Graetz, a former senior official in the Treasury Department of President George H.W. Bush.
Last month, Graetz and Yale political scientist Ian Shapiro published ``Death By A Thousand Cuts,'' chronicling the estate tax repeal movement as ``a mystery about politics and persuasion.''
``For almost a century, the estate tax affected only the richest 1 or 2 percent of citizens, encouraged charity, and placed no burden on the vast majority of Americans,'' they wrote. ``A law that constituted the blandest kind of common sense for most of the twentieth century was transformed, in the space of little more than a decade, into the supposed enemy of hardworking citizens all over this country.''
The secret of the repeal movement's success has been its appeal to principle over economics. While repeal opponents bellowed that only the richest of the rich would ever pay the estate tax, proponents appealed to Americans' sense of fairness, that individuals have the natural right to pass on their wealth to their children.
The most recent Internal Revenue Service data back opponents' claims. In 2001, out of 2,363,100 total adult deaths, only 49,911--2.1 percent--had estates large enough to be hit by the estate tax. That was down from 2.3 percent in 1999. The value of the taxed estates in 2001 averaged nearly $2.7 million.
Congressional action since 2001 will likely bring down the number of taxable estates still further. President Bush's 10-year, $1.35 trillion tax cut in 2001 began a decade-long phase-out of the estate tax. The portion of an estate exempted from taxation was raised from $675,000 in 2001 to $1.5 million in 2004. Next year, the exemption will rise to $2 million for individuals and $4 million for couples.
The impact has been clear, tax policy analysts say. The number of estates filing tax return is falling sharply, from 123,600 in 2000 to an expected 63,800 this year. And only a small fraction of those will actually be taxed.
Under the 2001 legislation, however, all of the tax cuts, including the estate tax's repeal, would be rescinded in 2011. The vote today is the first to address the sunset provisions.
House Democrats, led by Rep. Earl Pomeroy (D-N.D.), today will propose permanently raising the exclusion to $3.5 million--$7 million for couples. That would be enough to exempt 99.7 percent of all estates. The Pomeroy bill would cost the Treasury $72 billion over 10 years, compared with the $290 billion price tag of a full repeal through 2015, according to the Joint Committee on Taxation.
``The ideological fervor that is admittedly still pretty strong in some quarters is now being tempered by the runaway debt that is weighing down this country,'' said Pomeroy, who thinks voters are ready for a compromise.
Indeed, Senate Majority Leader Bill Frist (R-Tenn.) has asked Sen. Jon Kyl (R-Ariz.), a repeal proponent, to find a compromise that could win a filibuster-proof 60 votes in the Senate this year, even if it falls short of full repeal.
A compromise that includes any estate tax, no matter how small, may fail if the fervent repeal coalition holds firm, Graetz said. Repeal opponents have been unable to whip up big support, he said, because they never made the emotional case that the American belief in equal opportunity runs counter to the existence of an aristocracy born to inherited riches. Paris Hilton, who inherited her wealth. and now famously enjoys spending it, could have been their counter to the small-business owners and family farmers whom repeal proponents held up as the victims of the tax.
``The public doesn't believe people should be taxed at the time of death, whether they are paupers or billionaires,'' said Frank Luntz, a Republican pollster who has been working on estate tax repeal for a decade. ``Compromise is very difficult because the public doesn't want it to exist.''
It is that sentiment that the fledgling repeal forces tapped into when they mobilized more than a decade ago. A little-known Southern California estate planner named Patricia Soldano launched her repeal effort with the backing of about 50 wealthy clients, with the Gallo and Mars families leading the way. Other contributors included the heirs of the Campbell soup and Krystal hamburger fortunes. Frank Blethen, whose family controls the Seattle Times Co., was also pivotal.
The effort caught fire when small-business groups such as the National Federation of Independent Business and agriculture groups led by the National Cattlemen's Beef Association joined in.
By 1994, Newt Gingrich's Republican insurgents had latched onto the estate tax issue, but the Contract With America called for an estate tax reduction, not repeal. In 1995, Luntz poll-tested the term ``death tax'' and advised the new GOP majority to never use the terms ``inheritance'' or ``estate tax'' again.
By then, Soldano's Policy and Taxation Group was spending more than $250,000 a year on lobbying. A parade of small-business owners and family farmers appealed to their congressmen, worried that they could not pass on their enterprises to their children, even though most of them would not be affected by the tax.
``There's been a sustained, determined campaign of misinformation that in the end has left the American people with a very different notion of what the estate tax is and does than actually exists,'' Pomeroy said.
But ultimately, whether people believe the estate tax will affect them has little bearing on support for repeal. Early this year, with Soldano's money, Luntz again began polling, this time in the face of record budget deficits and lingering economic unease. More than 80 percent called the taxation of inheritances ``extreme.'' About 64 percent said they favored ``death tax'' repeal. Support fell to a still-strong 56 percent when asked whether they favored repeal, even if it temporarily boosted the budget deficit.
Democrats ``still don't get it,'' Graetz said. ``The politics are still very powerful.''
Mr. Speaker, I reserve the balance of my time.
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
I appreciate the words from my colleague on the Committee on Rules, the gentleman from Florida; but quite frankly, I do not know what he is talking about. The small businesses and the family farms, we are all in agreement that they need to be protected. That is not what the debate is about here today.
The debate is about whether three-tenths of 1 percent of higher income-earners in this country deserve additional tax relief at a time when they are cutting Medicaid, veterans benefits, when they are dipping into the Social Security trust fund.
This is not a death tax. What they are talking about is a debt tax,ÐD-E-B-T, adding to the deficits and the debt of this country. Right now, this year, we are paying $177 billion this year in interest on the debt. Next year it will be $213 billion. It is ridiculous. We need to rein in some of these extravagant tax cuts for the wealthy so that we can get our fiscal house in order here in this country, so we can start taking care of Social Security in the long term, so we do not have to cut veterans benefits or educational benefits or environmental protection.
Mr. Speaker, I at this time I will enter into the RECORD an article by E.J. Dionne entitled ``The Paris Hilton Tax Cut.''
[From the Washington Post, Apr. 12, 2005]
The Paris Hilton Tax Cut
(By E. J. Dionne Jr.)
The same people who insist that critics of Social Security privatization should offer reform proposals of their own are working feverishly to eliminate alternatives that might reduce the need for benefit cuts or payroll tax increases.
I refer to the fact that House Republican leaders have scheduled a vote this week to abolish the estate tax permanently. Under a wacky provision of the 2001 tax cut designed to disguise the law's full cost, Congress voted to make the estate tax go away in 2010, but come back in full force in 2011.
With so many other taxes around, it's hard to understand why this is the one Congress would repeal. It falls, in effect, on the heirs to the wealthiest Americans. Fewer than 1 percent of the people who died in 2004 paid an estate tax, and half the revenue from the tax came from estates valued at $10 million or more.
Yet, because the wealthy have gotten wealthier over the past three decades or so, the estate tax produces a lot of money. Counting both revenue losses and added interest costs, complete repeal of the estate tax would cost the government close to $1 trillion between 2012 and 2021, according to the Center on Budget and Policy Priorities.
And that is where Social Security comes in. You can reject outlandish claims that Social Security faces some sort of ``crisis'' and still acknowledge that it faces a gap in funding for the long haul. The estate tax should be part of the solution.
In a little-noticed estimate confirmed by his office yesterday, Stephen Goss, the highly respected Social Security actuary, has studied how much of the Social Security financing gap could be filled by a reformed estate tax. What would happen if, instead of repealing the tax, Congress left it in place at a 45 percent rate, and only on fortunes that exceeded $3.5 million--which would be $7 million for couples? That, by the way, is well below where the estate tax stood when President Bush took office and would eliminate more than 99 percent of estates from the tax. It reflects the substantial reduction that would take effect in 2009 under Bush's tax plan.
According to Goss, a tax at that level would cover one-quarter of the 75-year Social Security shortfall. The Congressional Budget Office has a more modest estimate of the shortfall. Applying Goss's numbers means that if CBO is right, the reformed estate tax would cover one-half of the Social Security shortfall.
This is big news for the Social Security debate. Michael J. Graetz and Ian Shapiro, authors of a new book on the estate tax, ``Death by a Thousand Cuts,'' have referred to its repeal as the ``Paris Hilton Benefit Act.'' To pick up on the metaphor, why should Congress be more concerned about protecting Paris Hilton's inheritance than grandma's Social Security check? How can a member of Congress even think about raising payroll taxes while throwing away so much other revenue?
This also means that Democrats now talking about reaching a ``compromise'' with the Republicans on the estate tax should put the discussions on hold until the Social Security debate plays itself out. Most of the ``compromises'' being discussed would repeal 80 to 90 percent of the estate tax. At some point, it might be reasonable to agree to make the 2009 estate tax levels permanent. But if they agree to any steps beyond that, Democrats will, once again, be placing the concerns of wealthy donors over the interests of the people who actually vote for them.
The Friends of Paris Hilton realize that as federal deficits mount and rising Medicare costs loom, the case for the total repeal of the estate tax grows steadily weaker. That's why they're hoping they can sucker defenders of estate taxes into a so-called compromise that gives away the store--the store, in this case, going to Neiman-Marcus shoppers, not to those who rely on Target.
This is an instructive moment. What we are having is not a real debate on the future of Social Security but a sham discussion in which the one issue that matters to the governing majority is how to keep cutting taxes on the wealthiest people in our country.
Those who vote to repeal the estate tax this week will be sending a clear message: They see the ``crisis'' in Social Security as serious enough to justify benefit cuts and private accounts. But it's not serious enough to warrant a minor inconvenience to those who plan to live on their parents' wealth.
Mr. Speaker, I reserve the balance of my time.
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Again, I am having trouble following this debate here. The gentlewoman from Tennessee talked about the thousands of people in her district that had to pay the estate tax last year. I am reading from a report here that said there were roughly 440 taxable estates, or about 2 percent of all taxable estates were made up of farm and business assets in the year 2004.
What we are talking about here, and again, if we agree to the Pomeroy substitute, is three-tenths of 1 percent of the wealthiest people in this country. That is what we are talking about. We are not talking about family farms. I mean, that is a red herring. We are not talking about small businesses. We are talking about the Campbell Soup fortunes, the Mars candy fortunes. We are talking about the richest of the rich. That is what this is about.
What is unconscionable is that we are moving forward on this at a time when the majority of this House is proposing budgets that slash Medicaid, that cut community development block grants, that cut veterans health benefits, that cut education, that cut things that people rely on every single day. This is absurd that we are having this debate here today.
Again, I would urge my colleagues to look at the facts. Please do not exaggerate the impact of the difference between what the gentleman from North Dakota (Mr. Pomeroy) has suggested and what you are proposing here. What you are doing here is trying to extend this to protect the richest of the rich, and that is just wrong.
Mr. Speaker, I reserve the balance of my time.
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
I want to make it clear, as there is a lot of misinformation being promoted on the other side here: our side supports relief for family farmers and small businesses. That is not what we are talking about here today. The difference between our approach is the three-tenths of 1 percent richest people in this country, the Paris Hiltons of the world, the executives at Campbell Soup, the heirs of Campbell Soup or Mars candy if you read The Washington Post today. That is what this is about. In a climate where the majority is cutting Medicaid, cutting veterans benefits, cutting programs that help feed the most vulnerable in our country, to go out and protect and to try to extend a special tax cut to those richest people in this country, I think, is unconscionable.
Mr. Speaker, I yield 3 minutes to the gentleman from North Dakota (Mr. Pomeroy).
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Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Let me again, just for the record, point out that the Pomeroy substitute would provide $3 million in relief for individuals immediately, $3.5 million by 2009, and $7 million per couple. And, again, what we are talking about here is not what the gentleman just spoke of. What we are talking about here is the richest of the rich in this country.
Mr. Speaker, I reserve the balance of my time.
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Mr. McGOVERN. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, what the majority is doing today is wrong. We need to help family farmers and small businesses. We all agree on that, and the substitute that the gentleman from North Dakota (Mr. Pomeroy) puts forth does that, with very generous exemptions.
But what the majority is suggesting is that somehow we need to do something to help the three-tenths of 1 percent of the richest people in this country at a time when they present budgets that cut Medicaid, that cut veterans benefits, that cut educational programs, that cut programs for the poor.
I mean, what are you doing? How can you come here with a straight face and say that we need to help the three-tenths of 1 percent richest people in this country, when so many people who are struggling in the middle class, so many struggling to get in the middle class, are having such a difficult time?
This is wrong what you are doing.
Mr. Speaker, at the end of this debate, I will call for a vote on the previous question; and if the previous question is defeated I will offer an amendment to the rule.
My amendment would take the cost difference between the Republicans' estate tax cut bill, which cost $290 billion, and the Pomeroy estate tax cut bill, which costs $72 billion, and shift that difference to the Social Security trust fund. We are talking about $218 billion that could go right into the Social Security trust fund.
The Republican leadership and President Bush claim that there is a Social Security crisis. If they truly believe that there is a crisis, they should step up to the plate and support this effort to shore up the Social Security trust fund now.
The Pomeroy substitute will exempt 99.7 percent of all estates. 99.7 percent. With this amendment we can restore $218 billion back to the Social Security trust fund and help save Social Security for future generations.
Mr. Speaker, there are a lot of people on the other side of the aisle who go back home and do town hall meetings and tell their constituents that they are for protecting Social Security. Well, this is a vote to show that you want to protect Social Security.
Mr. Speaker, I ask unanimous consent to insert the text of the amendment immediately prior to the vote on the previous question.
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