Jon Kyl

Mr. KYL

Mr. KYL. I believe that is exactly the case. By the year 2015, it would be 177,000 estates.

Mr. KYL. Mr. President, I appreciate that. In suggesting another reason for this, I do not think I am wrong in that, but I do acknowledge that certainly what the chairman of the Budget Committee has said is true. I appreciate his acknowledgment of our courtesy with respect to Senator Byrd. I know the Democratic side would do the same thing. That was done on a previous occasion last year as well. It is one of the better traditions of the Senate. It is also true probably this is not the first time this year because, for the first time in the history of the United States, I am informed, two Senators will be running against each other for the Presidency so that there may be other occasions where, when there are very close votes, our schedule may to some extent need to accommodate their schedules. Of course, as Members of this body they need to be here to do business as well, but we understand that is not always possible. If we could adhere to a slightly more set schedule that might be possible, but since we don't and it is almost impossible to have that kind of schedule, that issue is one that has to be accommodated, and I appreciate what the chairman said. I do hope the trend we have seen from 2 years ago to last year to this year of not having votes early on during the week that we consider the budget, but bunching them all at the end, a process which I don't think anybody in this body really likes, would not continue; that certainly the reason the chairman indicated will not pertain next year and that we can revert to the practice next year that we have traditionally followed, which is to try to have debate on amendments, votes, and then debate and then votes, and so on, hopefully, thereby minimizing the number of votes that we consider in this so-called vote- athon that, as I said, nobody in this body likes very much.

Mr. KYL. Mr. President, I would say to the chairman he is correct. I cannot verify the number 7,000 the chairman is talking about, but I can verify the number I am talking about. The Joint Committee on Taxation projects that 11,800 estates would be required to file estate tax returns each year. So that is a correct statement. Of course, the additional point I made earlier was that not everybody knows exactly what their liability is and, therefore, you have about 10 times as many people who have to end up filling out the forms, going to the expense of anywhere between $5,000 and $1 million to complete the forms, the 38 hours it takes to do it, only to find some of them do have a tax liability at the end of the day. Some of them do not. The fact that you may not be subject to the tax does not diminish the fact that you will be obligated to spend the money to file a return and do all the work to try to figure out that, in fact, you don't owe the tax.

Mr. KYL. Than this year.

Mr. KYL. As a matter of tax policy, I will answer my colleague, we can differ about the kind of taxes that should apply to economic activity, but we do agree that is the kind of activity that should be taxed, if it is on a sale, if it is on income, if it is on a return such as capital gains or dividends. But where the American people draw the line is with regard to death. I recall now the final point I wished to make. It is true the dead person doesn't pay the tax, but the people who are left to deal with his affairs at the worst time in their life do have to deal with this. What we are suggesting is, we ought to make it a little bit easier on these folks and not impose the kind of penalties that the current Tax Code, if it reverts to this because we don't act, goes to the 55 percent tax rate. I am talking about 131,000. According to the Joint Tax Committee, the number by the year 2015 will be 177,000. So this keeps increasing with respect to the number of estates each year that will have to be concerned about the tax.

Mr. KYL. It is actually not quite that. It is $5 million. The way this is written, if one spouse, let's say, the person who is not running the business, dies first, you can plan so you can get most of the effect of $10 million in the unified credit between the estate and the gift tax, but it is actually a $5 million exempted amount. So, for example, if a single person owns a business, it is only $5 million. It is not the amount that would relate to a couple of $10 million.

Mr. KYL. I ask the chairman to yield for a question. The additional $45 billion, would you have an estimate as to--well, first, what policy in the estate tax would be attached to that? And if it is to add to the exempted amount, what would that take the exempted amount up to?

Mr. KYL. Mr. President, I am happy to respond to my colleague. The debate now is not how to pay for a $10 trillion debt. We have a deficit of around $400 billion. We need to focus on not increasing the debt by increasing the amount of the deficit more than we have to. I share the Senator's goal for that. There are three fundamental ways you can reduce the deficit. You can reduce spending--and I am going to pick two out of the three. First, you can reduce spending. I will vote for that. I have a good record around here on trying to reduce spending. Yet there isn't anything in this budget that reduces spending. If we have a cost, the automatic action under the budget is to increase taxes, which is the second way you can do it. I reject that for the reasons I have pointed out. You don't help people by cutting their taxes here and raising their taxes over there. At best, you have created a neutral situation. The third way, of course, is to ensure that our economic policies are progrowth policies. We don't have too much in the way of regulation, too much in the way of taxation, that the Government basically tries to get out of the way of our economy so it can grow, produce jobs, create more wealth and, with that wealth, by the way, pay more taxes, which is a good thing. One of the reasons why we are collecting today in Federal revenues above the 40-year average in tax collections, with our Federal tax policy--we are collecting roughly 18.8 percent of GDP, more than the 40-year average. The reason is we have a growing economy, although it is slowing right now, to be sure. But because that economy has been robust, even at slightly lower tax rates, we are paying more in taxes, tax revenue, because the economy has grown. So the textbook answer to my friend is you can reduce the deficit, and ultimately the debt, in one of three ways: reduce spending, increasing taxes--though it has diminishing returns; if you do it too much, you don't get revenue, you can promote economic growth and you can bring the debt down. The last point. My colleague pointed out we were having hearings in the Finance Committee this morning and one of the witnesses there, as mentioned by my colleague, talked about what countries such as Canada, New Zealand, and Australia are doing. Do you know what they are doing? They are repealing their estate taxes. Why would they be repealing their estate taxes? This gets to the third way you make money. You grow. What happened in Australia is they found toward the end of life people with any means were moving to New Zealand, because they didn't have an estate tax. They wanted to keep them in Australia, so they decided, for competitive reasons, that they would eliminate the estate tax. So they stayed in Australia rather than moving to New Zealand. Canada and others are doing the same thing. Our rate, now at 43 percent, which would be locked in by the budget, is far above the worldwide average, which is an 18-percent rate. A lot of countries don't have an estate tax. My answer is that our better response is, if we are not going to repeal the estate tax, reform it in a way that doesn't inhibit economic growth and enables us to compete, enables our economy to produce revenue, even at a slightly lower tax rate because, at the end of the day, that will do us all more good than trying to do what my colleague would do--raise taxes as the way to pay for a tax reduction. To me, that doesn't make the kind of sense I would want to be associated with in promoting legislation. Let me simply yield the floor so my colleague can respond and not have to pose a question in order to make the point.

Mr. KYL. Mr. President, if I might respond with one final point, when you got to calculating how many--the lucky 7,000, and all that--I think there was some extrapolation going on, and I think the chairman is right, we should stick to the numbers from Joint Tax. That way at least we know exactly what we are talking about.

Mr. KYL. Of course.

Mr. KYL. Yes.

Mr. KYL. That is correct, on the motion to instruct conferees, 56 Democrats and Republicans voted for this identical proposal.

Mr. KYL. That is correct. The rate would be reduced from 55 percent, if we don't do anything, to 35. I believe the majority proposal is 45. This would make the top rate no higher than 35 percent.

Mr. KYL. Mr. President, if I might further, I had understood an amendment such as this might be offered. My understanding was it would accommodate both an increase in the exempted amount to $5 million per spouse, and I also believe to reduce the rate further from 45 down to 35, which would make it identical to my amendment. I might be wrong on that. If you can ask the author of the amendment here if that is true, it would conform it to the levels set in the amendment I have laid down as well. I wonder, as long as I have interrupted the chairman, if I might make one or two other points.

Mr. KYL. Mr. President, this amendment is a reprise of what we did last year in offering to reform the estate tax, sometimes referred to as the death tax. Now, in the budget itself, and in an amendment that has been offered by the other side, there is a provision to allow the death tax to be changed from the current law to a top rate of 45 percent and an exempted amount of $3.5 million, and there are some other features. My amendment, as with the proposal that had significant support last year, would reduce that top rate to no higher than 35 percent so that if you had more than one rate, at least the top rate could not exceed 35 percent, and both of the two spouses would have a $5 million exempted amount before the estate tax would kick in. In addition, this provides for a step-up in the basis of the property. It would enable the estate tax to be paid over the current period of time, and the amounts of money in the exempted amount, or unified credit of the estate gift tax, would be indexed for inflation. Now, the reason for my amendment is, I think most agree even in this body, either allowing the estate tax to continue under current law-- getting up to a high rate of 55 percent and an exempted amount of either $2 million or $1 million, probably $1 million--or the proposal of the Democratic chairman of the committee would result in a continued unfair burden on primarily America's small businesses and farms, but, in any event, anyone subject to the potential liability of estate tax for which there is a tremendous amount of money spent in attempting to get around the obligations of the tax or to plan against its eventual required payments. As a result, we look for ways to further reform the estate tax so that burden would be limited to only a few estates--the very highest estates--and that most people without a huge estate would not have the burden of trying to plan around it--to buy expensive insurance and hire lawyers and accountants and estate planners and the like. The object, in other words, is not simply to limit the estate tax liability but provide some certainty in the Tax Code so that most people realize, as their homes have gotten more valuable simply because of the increased value with inflation, and as their businesses have accumulated some capital wealth even though it may not be disposable in the sense of liquid income, they are not going to have to worry that their estate is going to be subject to a tax and so they are not going to have to worry about spending this money to deal with the tax. That is why we need to increase the total for a couple that would be exempted from the tax to $10 million and provide that the upper rate, if that rate kicks in, could be no higher than 35 percent. Above that, you are going to find people feeling that they have to try to prepare for or to get around the payment of the tax. And the irony is, Mr. President, those we are most concerned about really don't have the assets to try to spend a lot of money, whereas those who have enormous wealth can hire all the accountants, estate planners, and lawyers they want and buy insurance so that the ultimate impact of the tax does not hit them. Last year, when we proposed this same proposal of the 35-percent highest rate or an amount of $5 million exempted for both spouses in a motion to instruct conferees, 56 Senators, obviously both Democrats and Republicans, voted for that motion to instruct. Now, it was never carried out, but I think it demonstrates the will of this body that we want to have some reform that is more realistic and that exempts more estates from the payment of the tax and the consideration of the tax. According to the Joint Tax Committee, in the tax year 2011, 131,000 estates alone will be subject to the estate tax--131,000. Mr. President, that is too much of a burden on too many people in this country who are not extremely wealthy. By 2015, that number goes up to 177,000 estates. The advantage of my amendment is that it would protect approximately 119,200 family businesses and family farms from the estate tax each year. It would dramatically reduce the number of estates that have to worry about paying the tax. If we fail to act, in other words, about 131,000 families and family businesses and farms will be subjected to the tax in the year 2011 and thereafter. Under our proposal, we would, according to the Joint Committee on Taxation, reduce the impact of the tax so that only 11,800 estates would be required to file estate tax returns each year, if the exemption is set at $5 million each. So, that is a huge change. It is necessary to protect the folks I think everybody in this body would like to protect from having to worry about the estate tax. Now, it is interesting that when public opinion surveys ask people what they think about the tax, almost uniformly the results come back that the majority of Americans believe the estate tax is unfair and it ought to be eliminated. I remember a Gallup poll, now 3 or 4 years old, that said 60 percent of Americans believed it should be repealed. That is my preference, to repeal it. We haven't been able to get enough votes in this body to repeal it, but that is where the American people think it should be. Interestingly, there was a survey conducted after the last Presidential election, and people who supported both Senator Kerry and President Bush were asked what they thought about the estate tax. The interesting thing is that while 70-some percent of the people who voted said they thought the tax should be repealed, roughly 80-some percent of the people who voted for President Bush thought it should be repealed and 60-some percent of the people who voted for Senator Kerry thought it should be repealed. So this is not a partisan matter among the American people. They believe, whether they supported Senator Kerry or President Bush in the last Presidential election, that the estate tax should be repealed. I daresay surveys even now, to this time, demonstrate the American public opinion remains the same. The interesting thing is even those who understand they will never be subject to the tax because their incomes are simply not such that they will accumulate the wealth necessary to have to worry about the tax believe the tax to be unfair and believe it should be repealed. But even if you leave aside the issue of the morality of the tax and people's understanding that it is not a fair tax, it hits people at the absolute worst time--when a loved one in their family has passed away and they are having to consider whether pieces of the business or farm may have to be sold off to pay the tax--they recognize that, at a minimum, it should be reformed and that is all we are trying to do. For years, we have been trying to get a reform that basically accomplishes two objectives: It would increase the amount of the estate that is exempt from the tax so you don't have to worry about filing forms or having to try to plan around it; and for those who would still be subject to the tax above that amount, it would at least put a lid on it at a maximum of 35 percent. Now, again, the numbers in the current law, if we don't do anything, go up to 55 percent. And under the proposal of the chairman of the committee on the other side of the aisle, that would be reduced to 45 percent. That is still way too high, and the exempted amount would be $1 million, which is way too low. Because of inflation today, there are a lot of homes that have a value of over $1 million, especially in places such as California, New York, and some other places. So, clearly, an amendment along the lines that I will be introducing to make room in the budget for this kind of reform is necessary. I would like to make just about three other quick points. Last year, even though the budget could accommodate estate tax reform, the majority did not bring a bill to the Senate. And despite my best efforts, it wasn't possible to get anybody to allow consideration of a bill to reform the estate tax. As a result, in the Finance Committee at the end of last year, I asked that the chairman hold hearings and seek to have a markup this spring so we could actually pass a bill and not simply deal with it in the budget that we pass each year. The American people need to understand what is really going on. Each year we pass a budget that, theoretically, allows for a reform of the estate tax, but then we don't do anything about it. And the budget itself isn't law. The budget is merely a goal, a blueprint of where we want to go for the year. If you don't follow it up with a bill, you haven't done anything. But Members here pat themselves on the back and go back home and tell their constituents that they voted to cut the estate tax. Oh, that is wonderful, people say. But it is never followed up with an actual bill. So the chairman of the Finance Committee said: Well, he would have the goal of marking up a bill this spring. He has since advised me he has no plans whatsoever for a real bill on estate tax, and said: It won't happen. It is going to be in the budget. His amendment will provide for an estate tax reform in the budget, but he has advised that he has no plans to allow that to happen, to make it, in reality, a bill that would pass and become law. So all of this is an exercise in show, with apparently no real intent to follow through and provide relief for America's families and small businesses and farms and the like. What I would like to do, Mr. President, with my amendment, is not only demonstrate in the budget that this is the level that we want to set it, at a $5 million exempted amount per spouse and no higher than a 35-percent rate, but also ensure that the rules of the budget enable us to consider the bill during the year and not have it subject to some point of order that would enable people on the other side to say: Gee, we wish we could do it, but we just can't do it under the budget rules. My amendment will make it possible to consider such an amendment, and I serve notice on my colleagues that I intend to try to bring it up. We are not going to sweep this under the rug year after year. If we are honest with the American people about putting it in the budget, we ought to be honest about bringing it to the floor for a vote so that we can actually pass a bill, send it to the President, and get this job done. It is interesting that compared to other countries the United States is one of the worst in terms of the amount of money it takes from estates. The rate in the Democratic version would be 45 percent. The average around the world is 13 percent. There are a lot of countries that don't have an estate tax, and they understand why. The irony is, I had to leave a hearing of the Finance Committee just now, Mr. President, where an individual was testifying about countries such as Canada, Australia, New Zealand, and places such as that, where people have decided it is not a good idea to have an estate tax, and it has been repealed in many of these countries. The United States should take a leaf out the book of some of these countries that have found it is inimical to their development and their ability to compete with other countries. We know it is not good in terms of savings. The irony is that a lot of my colleagues are concerned about reducing the fact that our savings rate in this country is too low and are concerned about the fact that as a result we have to end up borrowing from countries such as China, for example. Yet having a big estate tax is exactly what is allowing that to happen because it discourages savings. If you save the money, you are just going to get taxed on it when you die, so why not just spend it? Incidentally, the Treasury Department estimates the estate tax reduces the amount of money that we contribute to charity. Treasury estimates that the estate tax reduces bequests by about 14 percent. Individuals are either choosing to save less or rely heavily on estate planning which, of course, is a deadweight loss to the economy unless you are in the insurance business, in which case you think it is a real nifty idea because people have to buy insurance against the estate tax obligation that they otherwise would have. Finally, it is an irony that the amount of money the Treasury collects--something over 1 percent of our revenue comes from the estate tax--is actually an equivalent amount of money to what is spent by people to try to avoid paying the estate tax. So, in effect, the money is paid twice. People buy insurance, they hire accountants and lawyers, and they try to find ways to get around the payment of the estate tax, and the amount of money that costs each year is almost exactly the same as what we pay in the estate tax to the Federal Government. This was according to a study by Henry Aaron and Alicia Munnell who are economists who have made this point over and over. The other interesting aspect of the cost of the estate tax is the amount of money it costs to try to plan around it. If you are a closely held business, the estate planning is estimated to range anywhere from $5,000 to $1 million. Again, if you are a lawyer or estate planner or you are selling insurance, that is probably a great thing. But it is not great for the people who have to pay the money, and it is not the best use of the money for the economy. The IRS estimates it takes 38 hours to complete the form, which is form 706. You may have an obligation, you may not, but you still have to fill out the form. The tax preparation fees can range from $5,000 to $50,000, and 52 percent of the estates that filed a return were required to incur a sizable legal and accounting expense and other expenses even though they owed no tax. Bear in mind, over half of the people who have to file the forms end up with no obligation. What we should do is have a tax that is predictable and clear with a large enough amount exempted so you know whether you are going to have to file the form. Hopefully, you would realize you don't have to file it because we have adopted the reforms I am talking about. We would go from something over 130,000 filers down to something over 11,000 filers. You would be catching the people with the big estates, those people who can really afford to pay the estate tax, but you would not be requiring everybody else to have to engage in this expensive planning and have the potential of having to pay part of the tax. Again, the summary numbers to remember are, under the amendment that will be filed--or has been filed, I gather--it would freeze the rates where they will be at the end of 2011, at 45 percent. That is only 10 percent less than the top rate of 55 percent under the previous law. And it will provide an exempted amount of $3.5 million. Far more estates will be caught in the estate tax trap with the amount at that level than they will be if both spouses subject to the tax have $5 million exempted as part of the unified gift and estate tax credit. I hope as with last year when 56 of our colleagues, both Democrats and Republicans, supported instructing conferees to include in the budget the precise proposal on estate tax reform that I have identified, we will get that kind of support out of this budget as well. The last thing I want to say is, I think it would be better for the debate and discussion if we had followed past practices and actually offered amendments and had debate on those amendments and then voted on those amendments. Instead, what is happening this year is the majority is not allowing any votes on any amendments until tomorrow, when we get into what we affectionately refer to around here as the vote-athon, when every 10 or 12 minutes we have a vote after 1 minute of discussion of the amendment, 1 or 2 minutes. I think it is 30 seconds per side, 1 minute equally divided. Great debate. Great debate. We have time to talk about these things now, but what you can't do is offer an amendment, have a vote on it, and know whether you have won or lost so you can determine what you want to do next. If you win, then you don't have to do two or three other amendments. If you lose, you may have to do those amendments. But we are not going to do that because the majority decided it would like to put pressure on the Members of this body to offer fewer amendments because they will have to all be voted on on Thursday and, of course, everybody knows the Easter recess begins as soon as we finish our business. So there is great pressure to offer fewer amendments, to hurry up and get out of town, rather than, in my view, spending the time necessary to do the people's business. One of the first things we ought to be willing to do is do what is necessary to both debate and vote on an estate tax reform that would be meaningful for literally hundreds of thousands of American citizens.

Mr. KYL. Mr. President, I appreciate the fact that the chairman of the Budget Committee and the majority whip have done some extrapolation from the number of people who die and two-tenths of a percent of this and that and, therefore, they have come up with a number. Why don't I quote the actual numbers according to the Joint Tax Committee. These are the officials numbers we deal with every year when calculating the effect of our legislation. According to the Joint Committee on Taxation, if my amendment were to be adopted, 11,800 estates each year would be required to file at the exempted levels that are set forth in my amendment. If we fail to act, 131,000 families, not 7,000--family businesses, farms and so on--will be subjected to the death tax each year, starting in the year 2011. The point is, these are not individuals. These are families or businesses with a lot more people affected by the tax than the number of filers. The filer represents all the members of the family or the employer of a company. That may be 50 or 60 or 200 people who may be out of a job. But that is how many will be subjected to filing this, 131,000. You might make fun of this and say it is a small percentage of the number of people in the United States. If you are unfortunate enough to die and your heirs have to deal with this problem, it is a very real problem to every single one of them. Over a 10-year period, obviously, you are talking about way more than a million people. You may say that is not a significant enough number to worry about, but it is enough. We worry about a few people who suffer from all kinds of things that we try to deal with. If you have a million Americans over a 10-year period subjected to an unfair tax, it is a problem we ought to address and not just make fun of the fact that it is only a million instead of 50 or 60,000. So let's get the numbers right. You can argue, if it is only 131,000 people, should we be worried about it. I say yes, somebody on the other side might say no, but at least let's get the numbers right.

Mr. KYL. If I may respond, as an expert in the Tax Code, the Senator from New Hampshire knows the technical name of the doctrine which applies in this case, except we have made an exception in the case of death. If you are robbed or if your house burns down and you collect insurance to pay for that unanticipated loss--not an economic activity; you didn't decide to invest and get a return on the investment when your house burned down--that is something you did not anticipate. It is noneconomic. The Tax Code treats that in a very good way for people, as one would expect. You get the insurance on it. You are not taxed on all that as income.

Mr. KYL. Yes.

Mr. KYL. The answer is yes. If I could expand on that with a true story, some friends of my wife and mine in Phoenix had a printing business. The head of the household came out from New York in the late 1940s and from scratch built this business which, at the time he died, employed about 200 people. They didn't take a great deal of money home because in this business, you have to plow all your profits back into buying the very latest laser printers and all the other equipment to keep it competitive. But they did all right as a family, well enough to be a major giver in the community. That is how we became friends with them because they were contributing to charities significant amounts, probably more than they could afford, boys and girls clubs and a variety of other charities. They were great contributors to the community, both in terms of their business, the people they employed, what they did, and how they supported the community. He died. When he died, his family found that despite the fact that they had spent millions on insurance and other ways to try to plan for his eventual death and the estate planning, in order to pay the tax, they had to sell the business. They did, and they got enough money to pay the tax. The company that bought it, to my knowledge, never contributed a dime to any charity in Arizona. It eventually closed the operation. So all the people who worked there no longer had a job, no contribution to the community. The family literally had to sell the business to pay the tax. While they were well off in terms of the average American, they were exactly the kind of people you want in your community to provide employment. That is the real story. We can make fun by saying: Well, it is only 131,000 each year in that category. But these are real families who are contributors to the economy and to our communities, and we ought to give them a break. Most people, even though they know they are not subjected to the tax, still, when you ask them the questions in public opinion surveys, say they know it is not fair. They like families such as the one I mentioned and would like to see this tax either reformed or repealed.

Mr. KYL. Mr. President, I thought I would like to respond to Senator Salazar while he is here, and I ask unanimous consent to have my time taken off the Republican side.

Mr. KYL. Mr. President, let me speak for just a few minutes in response to my colleague from Colorado because earlier today I offered an amendment which, as I gather, it would accomplish essentially the same thing as the amendment of the Senator from Colorado. My amendment explicitly would provide in the budget an accommodation for an exempted amount of $5 million per spouse, for a total of $10 million, as part of the unified gift and estate tax exemption, and a top rate not to exceed 35 percent. As I understand it, the amendment of the Senator from Colorado would accommodate that same relief. I noted that with my amendment we also ensured that the $5 million per person exempted amount was indexed for inflation. We provide a step up in basis, the existing period of time to pay the tax. I presume, or I would gather, that those same items are included in the Senator's amendment, but he can respond to that. I guess my point is that we have a difference between the amendment I have offered and the amendment of the Senator from Colorado. There is one difference between them, and that is this: Last year, we passed a similar amendment to the budget. No legislation was ever brought forward. Last year, the 10-percent tax bracket renewal or extension was passed unanimously, I believe, as part of the budget. The chairman of the Finance Committee never brought forth legislation to deal with that. He has advised me this year there will be no action on the death tax. We are going to have hearings, but there is not going to be any action on the Senate floor. I suspect that one of the reasons is because of the way he has approached it, the way the Senator from Colorado has approached it, which is to put the Government before the taxpayers; to say that before we can do any of this, we have to make sure the Government is made whole, which means we have to find a way to ``pay for'' the tax. That is the language that has been used. We have to ``pay for'' the tax. I ask, why should the American taxpayers have to pay for a reduction in their own taxes, if you start with the premise that the American worker earns money, and we want the American family to keep as much money as possible in their own pockets so they can provide for the needs of their families? Also, in this time of economic downturn, we even decided we would try to put more money in their pockets, urging them to spend it as a way to try to stimulate the economy. I would think we would start from the premise that the money belongs to the taxpayers, and we want to allow taxpayers to keep as much of that money as possible. If we are going to do taxes on one side, then we ought to hold them harmless; that is to say, if we believe their tax liability is too much or that a particular tax is wrong, as we believe that the estate tax is, that it is in desperate need of, if not repeal, at least significant reform, that the point is to reduce that estate tax burden and not to reduce it with one hand and then require a tax increase to ``pay for'' it on the other hand. How have you helped the American taxpayer if you say: We will reduce your taxes over here, but in order to keep the Government whole, we need to somehow make up the revenue for the Government because it matters more than you do, and therefore we are going to have to raise taxes on you someplace else in order to ``pay for'' this tax relief. We don't do that when we pass a farm bill around here. The baseline for the farm bill, what we spent this year, is something just under $600 billion. If we spent the same amount of money on the farm bill next year, we would not have to ``pay for'' any of that. We would only have to ``pay for'' an increase. Yet if we are going to extend an existing tax rate, say, the 10-percent bracket of the amendment of the Senator from Colorado, the idea is somehow we have to pay for that, even though it is exactly the same bracket it is today. If we are going to extend the capital gains rate or the dividends rate or any other marginal rates, keep them exactly the same as they are today, why should we have to raise taxes permanently someplace else in order to ``pay for'' that? You only get to that conclusion if you think the Federal Government is more important than taxpayers. Well, the way our country was founded is based on, ``We, the people.'' We created the Government. The Government is supposed to serve us, not the other way around. So you don't start from the premise that somehow, the Government has an amount of money today and no matter what happens, no matter how much we want to provide tax relief for people, the Government still has to have the same amount of money. So if we are going to provide tax relief for people, somehow we have to make up the money that we give back to the people. If you want to provide tax relief for people, the whole idea is that they don't have to pay for it in some other way. They get to keep the money. We trust them to spend it. That is the fundamental difference I have with the amendment of the Senator from Colorado. If the terms with respect to the amount exempted and the rate is the same--and I presume it would be--the question is, are we ever going to act on it? My amendment will be acted on this year one way or another. We are not just going to pass it in the budget as we have in the past. This isn't just going to be a show exercise where we all vote on the budget to cut taxes, but the cuts never really materialize. Why don't they ever materialize? Because the majority doesn't bring a bill to the Senate floor and try to get the bill passed. If the bill doesn't pass, the President doesn't sign it, and there is no tax relief. The budget is merely like the family budget. It is a goal. It is a blueprint. It is something you want to try to follow if at all possible. Yet when we pass tax relief in the budget, we are not really passing tax relief. We are just saying: This is something we would like to do. We would like to accommodate this in the budget. But if you never follow through with any action, what have you done except to fool the American people, make them think you are going to reduce taxes but you never, ever get around to actually doing it. My amendment will be brought to the Senate floor. It doesn't have to put the Government first. We don't have to pay for it by increasing the taxes on you over here so we can cut your taxes here. Now, my colleagues can either vote for it or against it, but we are going to get a vote on the floor of the Senate on reform for the death tax, and it will be very much along the lines of the amendment I introduced and the Senator from Colorado introduced. It will have a $5 million exemption per person, a step-up in basis for the property. It will be indexed to inflation, and it will either have one rate or two, but the top rate will not exceed 35 percent. The difference will be we will either give tax relief to people or we won't. If we give tax relief to people, we are not going to then have to ``pay for'' it in order to keep the Federal Government whole. Government gets about a little over 1 percent of its revenues from the estate tax. This reform would still allow a huge amount of revenue to come in because there are still a lot of estates that will pay that 35 percent rate on amounts above $5 million or $10 million. What it will do is take about 130,000 people who otherwise would have to file an estate tax return off of the rolls. They would not have to worry about it. They are the smaller businesses, the smaller farms--not the big estates but the smaller ones--that have to pay anywhere from $5,000 to $1 million to just plan around the eventuality of death, which, unfortunately, comes to all of us. So they buy insurance. They hire lawyers and accountants, and they pay a lot of money. In fact, in the aggregate, Americans pay as much money to avoid paying the tax as they pay to the Federal Government in the tax itself. What we want to do is to get most of those people off of the rolls so they don't have to worry about it. I certainly agree with my colleague from Colorado when he said the first principle should be certainty. We should know--especially with the death tax there should be some certainty. Well, you don't have any certainty if you don't know whether you are going to have to pay the tax. Unfortunately, the way it is right now, the way it is under the budget that has been brought before us is, you have at least 130,000 people who are going to have to file a return. You don't know how many are going to have to actually pay the tax. What our amendment does is reduce that number to a little over 11,000, so that people don't have to spend a lot of money hiring lawyers and accountants and buying insurance on the off chance they are going to have to pay for it; nor do they have to expend large amounts of money in tax preparation--38 hours, on average, per tax form filed. We don't want people to have to pay that amount of money. That is why we hope to get the number of filers down to something like 11,000. Then if they have to pay the tax, so be it. But the majority of Americans would be spared the tax.

Jon Kyl

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