Jon Kyl

Mr. KYL

Mr. KYL. I thank the Senator. Madam President, I wish to ask when this body is going to exercise some restraint and some discipline. I hear a lot about the deficit and how we have to be careful to not spend so much that we go into deficit this year. Every time I come to the Chamber, we are voting on yet another amendment to spend more money. This amendment would authorize $2.4 billion in addition to the $73 billion that already is in the farm bill. That is in addition to the $23 billion in emergency ad hoc spending that we have spent during the last 4 years. Last year alone we authorized $5.5 billion in emergency spending. It doesn't seem to me that we have any restraint or any discipline, or that we are willing to set any kind of priorities. We seem to be out of control with respect to spending. I just ask when we are going to say no. I want to give my colleagues notice. I am going to tally up all the spending that they propose, and when they come to the floor and talk about the deficit, I am going to confront them with the spending that they proposed. Obviously, some things have to be voted on. We, obviously, have to support the war on terrorism, and there are a lot of other issues, but when we keep adding emergency upon emergency upon emergency spending to a farm bill that is already $73 billion, clearly we are not exercising restraint. I want my colleagues to know what I am going to be doing. If they talk about deficit, I am going to talk about the spending they proposed above and beyond what is already in this appropriations bill and the authorizing legislation. I hope my colleagues will vote not to support this amendment for $2.4 billion in additional spending.

Mr. KYL. I thank the Senator. Later on I am going to offer an amendment--a sense-of-the-Senate amendment--to express ourselves on the question of the permanent repeal of the death tax. I daresay most farmers and ranchers in this country would rather see the absolute permanent end of the death tax than they would another handout from the U.S. Government. So I ask my colleagues to stop and think for a minute about whom they are really helping. If they are willing to support their constituents, their ranchers and farmers, then I think they will want to support me in the repeal of the death tax far more than to vote for yet one more annual subsidy for emergency relief.

Mr. KYL. Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL

Mr. KYL. Mr. President, I hope my colleagues are joined in making permanent the repeal of the death tax, and we can express that is our intention when we vote on this tomorrow morning.

Mr. KYL. This sense-of-the-Senate amendment says we should make permanent the repeal of the death tax that the majority of us voted for last year and the President signed into law. It is kind of a cruel hoax to repeal the death tax after a 10-year period, only to have that sunset the very next year. So if you are lucky enough to die in the year 2010, your heirs don't have to pay the tax. But if you are unlucky enough to live to the year 2011, you go right back to the death tax as it existed last year, with a 60-percent rate, with only a $675,000 exemption. That will be a huge tax increase in that year unless we are able to make the death tax repeal permanent. I submit that all of us who voted for that--the vast majority of the Members of this body--certainly intended that we weren't playing a trick on the American people. We intended the repeal of the death tax to be permanent rather than just for 1 year. The competing amendment is Senator Conrad's. The bottom line is that we not spend Social Security money either for tax cuts or wasteful spending. That is a proposition with which I suspect we can all agree. The only problem with his proposal is in the text of it, an assertion that the proposal to make permanent the repeal of the death tax actually would spend Social Security money. That is incorrect, as has been pointed out by Senators Gramm and Nickles. Let me talk about the reasons we need to make the death tax repeal permanent and why the arguments of those who oppose that are simply incorrect. One of the arguments the Senator from Rhode Island had was that there is the myth that lots of people pay the death tax. Actually, I didn't assert that. I don't think most people would say lots of people pay it. Too many estates pay it. I guess his point was that people don't pay it, estates pay it. Who owns estates? People do--the heirs, the children, usually, of the person who has died. It is not a very happy circumstance that the death of their father or mother causes them to have to pay a tax. All of the other taxes, with two minor exceptions that we have in our Tax Code, are a result of some action that we take, voluntary action. If you want to earn money, you have to pay income tax. The death tax is the only one where you don't choose the event that triggers the tax. You die; you pay a tax. That is not something you voluntarily do. That is why everyone who has voted for it has agreed it is an unfair tax and it should not be paid. The fact that not that many people pay it is beside the point. It affects millions and millions of people. Whom does it affect? First of all, all the people in the families of the estates that are being taxed. Secondly, it affects all of the people who tried to plan against the eventuality of paying a death tax. There are literally millions of those people. In 1999, the estimate is that we collected $23 billion in estate tax and, in addition to that, Americans paid an additional $23 billion in estate planning, in insurance, to accountants and lawyers and estate planners. So, in effect, it is a double tax. Another point the Senator from Rhode Island made was that there is really a demonstrable effect on charitable contributions. He cited a study that said there might be fewer contributions to charity if we repeal the death tax. First, it should not be Federal Government policy to force people to give money to charity. That should be from the heart, not because you have a gun at your head. We can have incentives and we can have a tax credit if you contribute to charity. But we should not say unless you contribute that money to charity, the Government is going to confiscate it from your heirs. That is unfair and not something Federal tax policy should do. Secondly, to summarize a story of a friend of mine, Jerry Witsosky, who started a small printing company: He eventually hired 200 people. He was one of the most generous people in our community of Phoenix, AZ. He just could not say no. He had Boys and Girls Clubs named after him. He was a very generous person. When he died, his family had to sell the business to pay the estate taxes. They sold it to a big corporation. So much for preventing the accumulation of wealth. Has that big corporation ever contributed to charities in my community? Not that I am awere. The bottom line is these private, family-owned businesses are pillars of their community. When they have to be sold off to some big corporation, don't tell me you are going to have enhanced contributions to charity as a result. The Senator from New Jersey had a couple of arguments--I wish he were still here. He is absolutely wrong in both of the arguments he made. I don't think he has actually read the bill that repealed the tax last year or he would not have made the statement that taxes are not paid on unrealized capital gains under the law that exists today, under the bill we passed last year. That is not correct. We substitute the capital gains tax for the estate tax. So for the first time there will be a tax on unrealized capital gains. The only amount we carve out from that is essentially equal to the exemption we have in the law today. So nobody who is exempt from paying the tax today would have to pay the tax 10 years from now. But except for that carve-out, there is going to be a capital gains tax substituted for the estate tax. So that argument of the Senator from New Jersey is simply incorrect. The second argument is also incorrect, that no Social Security surplus funds should ever be used and that that is what would happen if we made permanent the repeal of the estate tax. But that is not correct either. As the Senator from Texas and the Senator from Oklahoma pointed out, at the point in time that the repeal of the death tax is made permanent, we are running huge Social Security surpluses. In 2010, for example, according to OMB, we would have a Social Security surplus that year of $290 billion--a non-Social-Security surplus of $60 billion. Subtract the $4 billion in costs from the repeal of the death tax and you still have $56 billion in non-Social-Security surplus, and you still have the original $290 billion Social Security surplus. So the OMB numbers--the very numbers referred to in Senator Conrad's amendment--belie the claim that we would be taking Social Security money in order to pay for the repeal of the death tax. It just isn't true. Mr. President, what are the reasons for making the repeal of the death tax permanent? The primary reason is fairness. But the secondary reason is the confusion that exists in the code if we don't do that. Think about it. We gradually phase down the amount of death tax until the ninth year, when it finally goes out of existence, and 1 year later it is all back again in its worst form--the form that existed last year. How do you plan against that? Unless you are absolutely certain you are going to die in the year 2010, you are going to have to pay the same lawyers, accountants, buy the same insurance, and do the same estate planning that you do today that you will have to do tomorrow. You will have to do all of those things, and the net result is a very inefficient and wasteful situation--money that is unproductively going to these people who could be put productively back into the economy to create jobs, stimulate the economy and, to be fair, frankly, to our families. That money is wasted unless you consider money going to lawyers as not being wasted. As a recovering lawyer, I would argue differently. The fact is, that is unproductive capital. Wilbur Steger says if you can repeal it tomorrow, you can inject $40 billion of capital into our economy. The bottom line is repealing the death tax is good economically. It is also good for the people who have to plan against the eventuality of paying the tax, and it is good for the families who otherwise would have to bear the burden of it. It is not fair because it is a tax on death rather than voluntary activity. It is bad economic policy and bad tax policy because nobody can figure out under the law we passed last year what they are going to have to do, again, unless they know for sure they are going to die in the year 2010. Let's go back to the basics. Last year, because of a quirk in the law, we could only pass a 10-year tax bill. We did the best we could. We repealed the estate tax within that 10-year frame. Right after the 10 years expire, the whole provision sunsets, and we go right back to the Tax Code as it existed last year. Is that what we intended when the vast majority of us voted to repeal the estate tax we call the death tax? No. Were we playing a cruel hoax on our constituents, claiming with great fanfare that we repealed the death tax, but knowing all along we really only repealed it for 1 year? Did we really intend for it to be repealed for 1 year? I daresay everyone who voted for repeal of the death tax is going to support the amendment, the sense-of-the-Senate resolution that says we should make it permanent. Otherwise, they intended something different certainly than I did and, I think, the vast majority of the Americans who support this. The President in his budget calls for the ``permanentizing'' of the repeal of the death tax. That is calculated in his budget, and OMB makes crystal clear that budget is not taking one dime from the Social Security surplus to do it. That is why we should reject the proposal of the Senator from North Dakota which has in it a statement that that is what we are doing. If he is willing to drop that one clause of his sense-of-the-Senate resolution, then I will be the first to vote for his sense-of-the- Senate resolution and urge my colleagues to do so because I agree we should not take Social Security surplus money. But that is not what will happen if we are able to effect a permanent repeal of the death tax. At the end of the day, this is all about fairness. Is it fair to tax people who are members of a family and who did not choose that the breadwinner in the family die? Is it fair to tax them up to 60 percent of the value of that estate, especially since many of the assets of small businesses and farms are tied up not in cash or liquid assets but in the business itself, so that the net result is they cannot just write a check for that obligation, they literally have to sell the business, as my friend Jerry Witsosky's family had to do? Is that fair? Is that the policy the U.S. Government should be setting? I submit the answer is no. That is what the vast majority of Senators said last year. The House of Representatives concurred, and the President signed the repeal of the death tax into law. The only problem with that is, as I have said, it sunsets after the 10th year. That is what we need to correct. We need to find the right vehicle to do that. It has been said the farm bill is not the right bill to do that, even though the tax has a very perverse effect on family farms. That is why we bring this sense-of-the-Senate resolution to our colleagues--if you agree with us that we make the repeal of the death tax permanent, that we intended to do that, and we intend to do as soon as we have the right opportunity and reject the competing sense-of-the-Senate resolution that claims that doing this would take money from the Social Security surplus, something which now three of us have pointed out is absolutely totally false. If the author of the competing sense-of-the-Senate resolution will drop that claim and will simply say it is the sense of the Senate we not spend the Social Security surplus to ``permanentize'' tax cuts or on wasteful spending, then we will be happy to support that. We can support both of them. Otherwise, we are going to have to vote against the sense-of-the-Senate resolution of the Senator from North Dakota, and I urge my colleagues to support the sense-of-the-Senate resolution that Senator Nickles, Senator Hutchison, I, and others have sponsored. It is the right thing, it is the fair thing, and it is the honest thing to do for the American people so they are not misled that our action last year in repealing the death tax is for all time. It is not. It is only for 1 year. I conclude by submitting for the Record a list of organizations that support the permanent repeal of the estate tax, what I have been referring to as the death tax, and I ask unanimous consent this list be printed in the Record.

Mr. KYL. Mr. President, let me explain where we are. We have two competing sense-of-the-Senate amendments. The first is the Kyl-Nickles amendment. Incidentally, I ask unanimous consent that Senator Hutchinson of Arkansas be added as a cosponsor.

Mr. KYL. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL

Mr. KYL. I am happy to yield.

Mr. KYL. Mr. President, I ask the Senator from North Dakota to restate his request. I obviously misunderstood.

Mr. KYL. I thank the Senator from Texas very much for his great set of comments, and also for what he said personally. I agree, when the assistant majority leader says there is an attempt to slow walk this bill, that is simply not the case. In fact, I will not do it right now because he is preoccupied, but at some time when we have the Senator's full attention--he has had a chance perhaps to talk with others on his side--I will propound a unanimous consent to vote as soon as we can, to vote this hour, to vote next hour, to vote sometime this evening, to vote sometime before the cloture vote, on this amendment. If we could vote before 4:30, we would be prepared to do that. Or if there is an effort to get a little bit more debate before the vote, that is fine, too, but there is no effort to draw this out. I am ready to vote right now on this amendment and move on. The Senator from Nevada made the point that this amendment offered by the Senator from Arizona shows how hard it has been for the majority leader, what he has had to put up with for many months; that it does not matter quite what he does, the bill is never quite right and amendments are offered. There are three responses to that. First, there have not been that many amendments offered to this bill, certainly not that many which have been debated and voted on, only a handful. Secondly, I think the Senator from Nevada must concur the bill is not quite right because he and I have an amendment which we both think is a pretty darn good amendment that would make the underlying bill a lot better. Senator Reid himself proposed that amendment on our behalf. I believe it was yesterday. So, no, we do not think the bill is quite right either. Of course, when Senators do not think it is quite right, then we have an opportunity to offer an amendment. Frankly, there are a lot of things I do not like about it. I would love to propose a lot of amendments, but I selected only two: this very important death tax repeal because of the effect it will have in stimulating the economy, and the other is the amendment that Senator Reid and I sponsored, which also would have a direct stimulative effect on the economy because it helps the precise industry that was most dramatically affected, the air travel industry. We can relate it to the travel industry generally after September 11. So, no, there is no effort to slow walk this bill or to prevent it from ever being considered or voted on. We are simply trying to do what Senator Reid himself has tried to do, and that is make it better. I dare say the amendment I have offered would make the bill a whole lot better. As the Senator from Texas said, even though I am not much in favor of the underlying bill, if we were able to adopt this death tax repeal and make that permanent, I would be sorely tempted to vote for the majority leader's bill. The other point I wanted to make with respect to this business of slow walking is exactly what the Senator from Texas said. We could vote on the Centrist Coalition proposal right now. I think everybody recognizes that would pass. We could be out of here by 5 tonight by allowing the bipartisan Centrist Coalition bill, which President Bush has endorsed, to come to the floor. It is, in fact, the only bill that can pass this body. So if we are talking about getting something passed and getting it to conference so we can actually have a stimulus package bill, we all know the formula for that. It does not have to take but another few minutes and we could be done with it. We offered to do that. I offered to be sorely tempted to vote for the underlying bill if my death tax amendment is adopted, and I probably would. We can get all this done very quickly. One other thing I wanted to respond to that my friend from Nevada argued, and it is the same old argument that was made when we considered the death tax repeal the first time around--it was wrong then and it is wrong now--is that the death tax only applies to the top 1 deg. percent and therefore it is a tax on the rich, and who would care about the rich? Well, there are really three responses to that. The first is that it is just not true. As I noted before in my earlier comments, Dr. Wilbur Steger, who is a Ph.D. and president of CONSAD Research Corporation, and a professor, has noted this argument that it only applies to the top 1 deg. or 2 percent is wrong. He says that, in fact, in a typical year, the total number of taxable estates that consist largely of family owned businesses likely exceeds 10,000. What does that number really mean? First of all, that is 10,000 businesses. Multiply by that the number of employees who work in each business. Pick any number. One certainly has to say the people who work for those businesses are directly affected. If the business goes out of business because the death tax has to be paid, that directly affects every employee in that business, times the number of family members with each one of those employees, times the number of stores that they buy things from and all the rest of it. A lot more people are affected by the death tax than just the number of people who happen to die each year who end up paying the tax, in addition to which everybody who might have to pay the tax has to be worried every year about the estate planning. They, too, are directly affected. As I pointed out before, they end up paying at least $23 billion a year, and the lawyers, accountants, estate planners, insurance, and other expenses of estate planning that enable them to deal with this future contingency. They may not die this year, but they are having to shell out a lot of money this year in order to deal with their potential future estate liability. It turns out a lot of people are affected by the existence of the death tax. What the Senator from Texas pointed out a while ago is the clincher. There is nothing more destabilizing to an economy than having a temporary tax, especially one which no one can predict with any degree of certainty is going to apply in the future. I refer specifically to the estate tax. We phase it down a little bit over the next 8 years. Then we repeal it altogether. Then it goes right back into existence as it was last year with a 60-percent rate. How can I plan against that if I don't know when I am going to die? Do I plan for it in the eighth year, in the seventh year, or maybe in the year that it is repealed altogether? That would be great if I died that year; at least my heirs would not be burdened. But if I live an extra year, they have big problems. What about beyond that? Nobody knows. As the Senator from Alabama argued earlier, you do not know whether to invest in the plant equipment or put the money away because you have to pay the estate tax with it. It is very destabilizing. In the meantime, you keep shelling out that money to the estate planning folks rather than investing it in your business. That is why it belongs on this bill. We know it will create jobs, 240,000 jobs in 7 years. Americans would have $25 billion in additional disposable personal income. This is from a report of the Joint Economic Committee, not my numbers. We have other estimates that back up this point. As a matter of fact, Dr. Steger, who I quoted earlier, indicates an immediate death tax repeal would provide a $40 billion automatic stimulus to the economy. That is because of the pent-up capital that citizens do not deal with because of the potential tax liability that exists; a $40 billion automatic stimulus to the economy at virtually no cost to the Treasury. Talk about getting the bang for the buck, I don't think there is anything we can do that would have a greater immediate impact on our economy than the repeal of the death tax. We talk about extending unemployment benefits for 13 weeks. Does that stimulate the economy in any way? No. Does that create any jobs? No. But it is a central feature of the stimulus bill that is before the Senate. We may want to extend unemployment benefits for the people currently out of work. But I don't think anyone can argue that stimulates the economy. To anyone who says, Senator Kyl, how come you are offering the death tax repeal on the stimulus bill? I say, how come you are offering or supporting the unemployment extension? That does not create a single job. I know people would rather have a paycheck than an unemployment check. Let's do something that would stimulate the economy, create jobs, provide that investment, take the $40 billion in pent-up capital, and get it into our economy, create the 240,000 jobs. I have heard the arguments in response. I cannot imagine the Senate, which passed the death tax repeal before, would not want to finish the job of making that permanent, given the fact that it does not do a whole lot of good, except if you die in the 10th year, to do the partial repeal, the temporary repeal, the confusing and destabilizing repeal that we effected last year, without going into the final step and making it permanent. It seems to me to make so much sense. The Senator from Texas made a comment; he thought maybe the effort would be to deny a vote. I certainly hope that is not the case. I think the American public deserves to know where their Senators stand on this issue. Do you believe in making the death tax repeal permanent or not? Do you believe it can help stimulate the economy and create jobs or not? There are those who are going to differ on this. That is what the Senate is all about. That is fine. Take the vote. Stand where you want to stand on the issue. But we can do that quickly. We can move on to the next amendment. We can consider a whole number of amendments before we have the vote on cloture sometime tomorrow. That would be my proposal. As Senator Gramm said, perhaps what we should do, and I will wait until the assistant majority leader is on the floor, perhaps we should ask unanimous consent, and I will indicate at the appropriate time when someone from the other side is here to respond other than the Senator from Minnesota, who just walked on the floor, we will ask unanimous consent to be able to vote for this at a time of their choosing prior to the cloture vote. The Senator from Minnesota has arrived. If he wishes to speak to this, I am happy to defer to him.

Mr. KYL. The point of the unanimous consent request of the Senator from Nevada was to allow the second-degree amendment to the Reid-Kyl amendment and to allow the Senator from North Dakota to speak about that amendment for 2 minutes and immediately return to the pending business, which is the Baucus amendment with the second-degree amendment, offered by the Senator from Alabama on behalf of myself, pending; is that correct?

Mr. KYL. I say the Senator from Alabama is exactly correct. It is an unfairness for the small business because the small businessmen are taxed in this fashion. The big corporation--I am all for big corporations, too, but they don't have to worry about this kind of thing. So there is, in effect, a perverse incentive working here, but it is one of the things that is not only bad for the economy but it makes it unfair. It is not really an American way of looking at things, to my way of thinking. If the Senator from Nevada would like to speak, we have had our chance here, so the Senator is welcome to the floor.

Mr. KYL. Mr. President, I say to the Senator from Alabama, that is another entirely separate argument for eliminating the tax and making its repeal permanent. The Senator is absolutely correct. In addition to the wasteful money we spend trying to avoid the liability or reduce it as much as possible, rather than putting that into productive assets, the Senator is pointing out that because of the possibility--it is almost like a black cloud hanging over your head--if you think you are going to die, you are not going to make that new investment, you are not going to revitalize your plant and equipment or hire that other team that is going to produce a new product, or maybe go out of your way to market the product--all of those things that will be an investment in our economy. You are going to defer that because you know you are going to need it for something else; namely, to pay the grim reaper, because you know you are going to pass away. I think of an example back home of a company that became very successful. One entrepreneur moved to our State and over time built up a wonderful business employing over 200 people. He was a great contributor to the charities in our community. He was one of those pillars of the community that you just like to think of but he died. His family had a terrible time. The tax liability there was so great that they ended up having to sell this business. The idea of a death tax is to prevent an accumulation of wealth. That is the theory of it. What happened here? They had to sell to a big company, the kind of big corporation the Senator from Alabama was just talking about. Instead of this small--I would say, with 200 employees, it is getting to be a medium-size business, but it was still a sole proprietorship basically. But instead of having the business in our town, employing all those people from town, contributing to the charities and the local economy, and so on, this big corporation came in. Are they still employing that number of people? No. Are they contributing to the community as did our friend Jerry? No. These people are not making the kind of investment--and I don't denigrate them at all, but they are trying to run a business, and that is fine, but there is a difference here. The small businessman who built up his business continued to plow everything he had back into the business, which is exactly the point the Senator from Alabama is making here. You put it back into the business so it can continue to grow because it is a family-owned business. You do not have to take out all the money and send it someplace else. Because they did that, they were asset rich and cash poor. You do not want to find yourself in that position if you are going to die, because you cannot pay the taxes. That is why his family had to end up selling the business.

Mr. KYL. Reserving the right to object.

Mr. KYL. I ask unanimous consent to have printed for the Record a 3- page listing of a variety of organizations, all of which support repeal of the estate tax.

Mr. KYL. Mr. President, what is pending before the Senate is my second-degree amendment to the Baucus amendment, which for those who are interpreting this means we are back on the question of whether we can repeal permanently the estate tax or, as it is frequently called, the death tax. As we all will recall, last year when we passed the Tax Reform Act, one of the provisions that was incorporated within that bill was a gradual reduction of the estate tax rates and enlargement of the exemption, and finally, in the ninth year, an actual repeal of the existing death tax. We were joined in a bipartisan coalition to support that. There were literally scores and scores of organizations--and I am going to ask unanimous consent after a bit to print in the Record the list of organizations that supported the repeal of the death tax--and we even defeated an amendment of Senator Conrad of North Dakota that would have put the Senate on record as saying we should not make it permanent. Clearly, the intention was to make it permanent; the desire was to make it permanent. I do not think anybody would have stood before the Senate and said we wanted to repeal the estate tax for 1 year. They would have been laughed out of the body. Yet that is precisely what the effect of our action was. There is a rule in the Senate that does not allow us to work in more than a 10-year window without a 60-vote majority. There is a rule that required us to change the procedure, and by making the procedure for 10 years, the effect is to sunset the repeal. That means we go right back to where it was last year with a 60-percent rate of the death tax and only a $675,000 exemption. If one wants to see how this works, in the year 2010 you do not have to pay any death tax if you die. It basically pays you to die in that year, but do not try to live a day into the next year because you are then going to have to pay the entire death tax as it existed in 2001. We go way back, in other words, to a punitive, destructive death tax. Clearly, we did not mean for this to be the way it was. Clearly, we would like to make it permanent, and this is the time to do it because there is significant evidence that making the death tax repeal permanent will significantly stimulate the economy and create jobs. That is the reason for bringing it up at this time. We are talking about the stimulus package. The President is talking about creating jobs, and by repealing the death tax permanently we can achieve those objectives. How is that so? In simple terms, people still have to plan for the death tax. They still have to buy the insurance. They still have to pay the lawyers. They still have to pay the estate tax planners, the accountants, and all the rest of it unless they are absolutely sure they are going to die during one of the 365 days of the 10th year. If they cannot be sure they are going to die during that period of time, then they need to plan because the tax is back in effect. Who, after all, except someone who would be deliberately taking their life, can predict when they are going to die? One sure does not want to be lucky enough to live beyond the 10th year because then they are going to get stuck with the death tax with its punitive rates, just as it was last year. That is why there is a huge expense involved in the existing law, and that expense every year, by farmers and small businessmen and other people in this country, is money that is spent on an unproductive enterprise that could be spent in creating jobs. Let us get to a couple of specifics, and then I will ask some of my colleagues to join in this debate. A December 1998 report by the Joint Economic Committee concluded the existence of the death tax in this century has reduced the stock of capital in the economy by nearly half a trillion dollars. By repealing the death tax and putting those resources to better use, i.e., investment, the Joint Committee estimates as many as 240,000 jobs could be created over the next 7 years, and Americans would have an additional $24.4 billion in disposable personal income. That is stimulus. You want to stimulate the economy? You want to create jobs? You want investment in capital and other businesses? Permanently repealing the death tax will do that. Last year, Dr. Wilbur Steger, a Ph.D. president of CONSAD Research Corporation, and an adjunct professor of policy science at the Heinz School of Carnegie Mellon University, testified before the Senate Finance Committee and disputed the death tax supporters' arguments that only 2 percent of Americans are affected by the tax. Rather than affecting less than 500 family businesses in a typical year, he said the total number of taxable estates that consist largely of family- owned businesses likely exceeds 10,000 families annually. He went on to state an immediate death tax repeal would provide a $40 billion automatic stimulus to the economy. So what we could do best to stimulate the economy and create jobs is to ensure that the death tax repeal we voted for last year is in fact made permanent. I am going to provide some additional evidence that we can create jobs and stimulate the economy with the permanent repeal of the death tax, but at this time I yield to my colleague from Oklahoma, who I know wanted to make a few remarks before he has to leave.

Mr. KYL. Mr. President, I appreciate the spirit in which the Senator from North Dakota proposed the second-degree amendment. I am hopeful we will be able to adopt the Reid-Kyl amendment at a later time. Amendment No. 2807

Mr. KYL. Mr. President, let me give a sense of the businesses and organizations involved--everything from the American Council for Capital Formation, American Family Business Institute, Hotel & Lodging Association, the National Automobile Dealers Association, Citizens Against Government Waste, Citizens for a Sound Economy, a long list of agricultural organizations, Independent Insurance Agents of America, National Association of Home Builders, National Association of Manufacturers, National Cattlemen's Beef Association, National Corn Growers Association, National Taxpayers Union, Chamber of Commerce, and on and on, a whole number of businesses and organizations. As we recall from the debate we had last year, a group of environmental organizations, as well, were involved because of the pro-environmental ramifications of repealing the death tax permanently. It is very important to focus for a moment on why we are proposing this amendment on this bill at this time. President Bush's budget for the next fiscal year incorporates a permanent repeal of the estate tax. This is something the President knows will benefit our economy and create jobs. That is why it is included within his fiscal year 2003 budget sent here yesterday. This is propitious timing. We have the opportunity to act on this now. Earlier I indicated the reason this has such a stimulative effect is that there is such a large amount of money being spent on lawyers and estate planning and insurance that could be more productively put into investment in companies for the creation of jobs. To give an idea of the magnitude of the money we are talking about, I will cite a study done for last year. Alicia Munnell, a member of President Clinton's Council of Economic Advisers, estimates the cost of complying with death tax laws is roughly at the same magnitude as the revenue raised by the tax itself. In 1998, that was about $23 billion. In other words, for every dollar the death tax raises for the Treasury, it almost costs Americans that same amount of money to prepare to deal with the death tax when their time comes. It is literally a double tax. Half of it is totally unproductive. I am a lawyer. I don't mean to suggest that paying money to lawyers is a bad thing. But one can hardly argue that it creates new jobs. Perhaps one could say we need to have more lawyers. As long as we keep this law on the books and we do not permanently repeal the death tax, we can put a few more lawyers to work. It is a stretch to argue that justifies keeping this unfair law on the books. No, the reality is that we can create a lot more jobs, 240,000 jobs over the next 7 years, by a repeal of the estate tax. We can provide another almost $25 billion in disposable personal income, according to the Joint Economic Committee. These numbers do not lie. We have an opportunity to do something positive for our economy, for job creation, for investment. That is why the President has included this permanent repeal in his budget for this year. Let me show how this works and how unfair it is. Somebody dies in the year 2009. None of us can predict when we will die. If you die in the year 2009, those in your family who succeed you will be faced with a potentially high 45-percent death tax rate. The good news is they have a $3.5 million exemption because that is the way we structured it under our tax bill last year. If you are lucky enough to die in the year 2010, assuming that dying is a good thing--when I say ``if you are lucky enough,'' I don't mean it that way--if you can avoid dying in the year 2009 and stretch your life into 2010, you will be able to have your loved ones avoid the death tax entirely as a result of the bill we passed last year. However, if you are able, through good medicine and health care and the like, to extend your life to the following year, the year 2011, your family is in a world of hurt. Because you lived a little bit longer, they are going to go back to the days when we had a 60-percent death tax rate and an exemption of only $675,000. What is a sensible small business person, farmer--whoever--going to do, given the fact that it is pretty difficult to predict when you are going to die? And you clearly do not want to take the chance that the only year that you are likely to die in is 2010. What you are going to do is pay lawyers and accountants and estate planners and buy the insurance that needs to be purchased to reduce that death tax liability to as little as possible. That is the expenditure we are talking about that is unproductive. That is to say it does not create any new jobs, it doesn't stimulate the economy; all it does is continue the status quo of a death tax that is going to take effect when you die. This is the reason it is not only unfair, but what we accomplished last year is really, in some respects, a cruel hoax. I know a lot of people I talk to back home believe we actually repealed the death tax. There was some bragging about the tax bill last year. It was a great bill. The problem with it is, as the Senator from Oklahoma said, because it was done as part of a reconciliation package, it could not exceed a 10-year time span. I have tried to go back home and explain to people what we did was really good. We established the principle that we did not want the death tax anymore and we had a bipartisan coalition of Senators who voted overwhelmingly for that. But we now have to finish the business we started. As the President is proposing in his budget, we have to make that repeal permanent. Otherwise, we not only have a very unfair situation, but we have a very inefficient and I would say uneconomical situation here. We have the opportunity to put that money to work that otherwise would simply go--again, I don't mean to denigrate lawyers--to pay those lawyers to figure out how to enable you to maximize the reduction in your death tax when you die.

Mr. KYL

Mr. KYL. Mr. President, given the fact we are in morning business, I wish to speak to the question of the repeal of the death tax to which the Senator from Oklahoma just referred. As my colleagues will remember, of course, the repeal of the death tax was part of the tax package that was passed earlier in the year, but because of the unique procedures of the Senate and the rules under which we operate, we could only look to a 10-year period, as a result of which, perversely, we phase down the death tax and end up repealing it in the ninth year, so it is only effective for 1 year before the whole thing sunsets and we go right back to the current situation with respect to the application of the death tax. I do not think most Americans realize that is what has happened, but people who have to plan for their estates do realize it has happened. This is why a permanent repeal of the death tax now would be so helpful as a stimulus to the economy because all of the estate tax planning, the insurance, and all the other activities people have to do to provide against the possibility of paying the death tax must continue, as it has in the last many years, with the uncertainty of knowing whether or not, if ever, it is going to be permanently repealed and the expenses of all that have to continue to be incurred, expenses that could be put into investments so we could create jobs for our economy, precisely what the President has talked about doing with his stimulus package. It is time for us to complete the job we began and see to it that the repeal of the death tax is, in fact, permanent and, therefore, meaningful. Let me note some of the uncertainty that the lack of total repeal causes our family businesses, our farms, and individuals. As I said, the business owners are going to continue to have to do the estate planning that is costly, cumbersome, and time consuming. If we repeal permanently the death tax, then these resources can be reinvested directly into these businesses, thus creating new job opportunities and providing a much needed boost to local economies. In June 2001, a bipartisan majority of Congress did, in fact, act responsibly and provided this repeal of the death tax, much needed relief to our American families, with that historic tax package. But if we do not finish the job, we are going to be held in limbo with respect to the death tax because it comes right back into play after the end of the 10-year period. The amendment I have offered will not be voted on until perhaps this afternoon. It will repeal the death tax forever so that our children and grandchildren will not have to worry about it or plan to have to pay for it. Actually, last year's tax legislation has had the perverse result that more planning is necessary to deal with the death tax than currently is the case. Accountants, lawyers, and insurance companies are having a field day, frankly, with the uncertainty that is encapsulated in the current state of the death tax legislation. More planning is needed now because nobody knows for sure if and when it will ever be fully repealed. The sunset provision adds to the complexity of future death tax planning, increasing wasteful costs that are an unproductive drag on our economy. Until permanent repeal is certain, family businesses, farms, and ranches must continue to pay the high cost of life insurance policies, death tax planners, and tax attorneys. These expenses total more than $12 billion a year according to CONSAD Research Corporation in a study, ``The Federal Estate Tax: An Analysis of Three Prominent Issues.'' That is money that could be saved, could be reinvested in these businesses to create the kinds of job opportunities the President is talking about in urging us to move on with an economic stimulus and job creation package. Clearly, burying the death tax will enable family businesses, farms, and ranches to begin investing those billions and start providing more stimulus. A more efficient utilization of these resources will result in an immediate stimulus for the economy. More workers will be hired, more capital assets purchased, and more productive goods produced if we eliminate the confusion over the death tax's repeal. I think we all understand why we repealed the death tax in the first instance. In addition to the fact that a huge amount of money is spent on estate tax planning, studies indicate we spend about the same amount each year on the estate tax planning as is paid in estate taxes altogether. So it is really a double taxation. We are paying an amount of money to deal with the eventuality of paying an estate tax, and that is paid by a lot of people who do not end up paying the tax but end up having to pay the expenses of dealing with the existence of a death tax, and then an equal amount of money is spent in the estate tax itself. In 2009, families, frankly, who are grieving their lost ones will be faced with a potentially high 45-percent death tax rate. Fortunately, they are going to be able to utilize a $3.5 million death tax exemption which was enacted into law last year, but in 2010 families grieving for lost ones will avoid the death tax entirely. They will only have a total of $5.6 million of stepped-up basis, but that will effectively exempt them from all future capital gains tax, a tax in any event of which they would control the timing. Then in 2011, families grieving their lost ones will feel the wrath of a resurrected death tax returned to its 2001 rate potency. Rates will be as high as 60 percent with a paltry $675,000 death tax exemption. That is the way our repeal, at midpoint of last year, worked. So it is a very unfair and arbitrary treatment for the death of family members, as well as, as I said before, creating perverse economic incentives. One can only imagine the extremes to which a family will go to keep fatally ill family members alive in 2009. Nobody wants to predict or argue for anyone to die in any particular year, and that is exactly the perverse nature of the code that we have created now. Unless one dies in the year 2010, they have a big problem. And for heaven's sake, do not wait to die until the year 2011. Now what kind of tax policy is that, where we say if one dies in the year 2010 they get full benefits of repeal but if they hang on to life and die a year later they are right back to where they were a year ago with a 60-percent tax rate and an exemption that does not cover most of the family farmers and businesses that we are talking about? That is horrible moral policy. It is horrible economic policy. It cannot be the policy of the U.S. Government and yet that is exactly what our repeal last year resulted in, the reinstitution of the tax in the year 2010. It is an outrage that our Tax Code would incorporate such arbitrary and immoral incentives. Of course that is not what we intended when we repealed the tax. It is not what we intended when a bipartisan majority voted on that repeal and passed it. We really wanted it to be forever, but again it was the rules of the Senate that limited us to a 10-year program. So the best solution would be to finish the job and permanently repeal the death tax effective January 1, 2002. By making the tax repeal permanent in 2010, Congress can keep the promise it made last year. I think this is the only moral way we can respond to this very immoral tax. I will have more to say when we actually debate the amendment, but I close by asking my colleagues to allow us to present this amendment and have an up-or-down vote on it without playing parliamentary games. It is possible that somebody could second degree this amendment. We could play the game by second degreeing it. We could second degree somebody else's amendment with this amendment. We can do all of those things, but I think the American people would like for us not to be playing games. When I go home, that is what I hear all the time: Why do you guys go back to Washington and play all of these, as they say, partisan games? The repeal of the death tax and the passage of the tax bill was a successful bipartisan effort. So I think it is important the majority of us who approved that tax package, including the death tax provisions, be given an opportunity to vote up-or-down on this amendment, which finishes the job we started, and enable us to vote to repeal the death tax permanently. If we cannot get that kind of a vote, then all we are doing is hiding from the American people our views with respect to this issue and allow a lot of people to say, oh, sure, yes, I voted for repealing the death tax knowing full well that it was not an effective appeal because it only existed for 1 year. One better not wait to die the following year if they want to get the advantage of what we did. That is a perverse policy. So I urge my colleagues to allow this vote, up or down, on the death tax amendment. We will be bringing it up this afternoon. I am looking forward to a spirited debate on it. At the conclusion of that debate, we need to stand up for what is right and true and vote yes or no. If my colleagues do not want to make it permanent, then stand up and say so and let everybody know exactly where they stand. I think the majority of us are going to want to finish the job we started, make this tax cut permanent, allow the people who otherwise would have to spend $12 billion a year or more on estate planning to put that money into more productive enterprises, to create jobs and help us get out of the economic doldrums our country is in today. It is good policy for the economy but, more importantly, it is good policy for small businesses, farms, and the American people.

Mr. KYL

Mr. KYL. I do not object.

Mr. KYL. Mr. President, I have a question for the Senator from Nevada. We are going back on the bill immediately after our respective caucuses; is that correct?

Mr. KYL. Mr. President, reserving the right to object.

Mr. KYL

Mr. KYL. Certainly.

Mr. KYL. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.