Daniel Moynihan

Mr. MOYNIHAN

Mr. MOYNIHAN. I move to reconsider the vote.

Mr. MOYNIHAN

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. MOYNIHAN. Mr. President, I ask unanimous consent to set aside the amendment that is now pending.

Mr. MOYNIHAN. Mr. President, I send an amendment to the desk.

Mr. MOYNIHAN. I ask unanimous consent reading of the amendment be dispensed with.

Mr. MOYNIHAN. I thank my friend. What a great way to go off for the weekend. I thank my revered chairman.

Mr. MOYNIHAN. I do thank you, sir. I thank the Chair. I think it is best to make my departure quickly.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, today I introduce legislation to simplify the taxation of life insurance companies under the Internal Revenue Code. This bill repeals two sections of the Code that no longer serve valid tax policy goals, section 809 and section 815. Section 809, which was enacted in 1984 as part of an overhaul of the taxation of life insurance companies, disallows a deduction for some of the dividends that mutual life insurance companies pay to their policyholders. It was enacted at a time when mutual life insurance companies were thought to be the dominant segment of the industry and was intended to ensure that stock life insurance companies were not competitively disadvantaged. Since that time, however, the number of mutual life insurance companies has dwindled while the number of stock life insurance companies has grown and the industry estimates that mutual life insurance companies will constitute less than ten percent of the industry within a few years. The section 809 tax has not been a significant component of the taxes paid by life insurance companies but it has been burdensome because of its unpredictable nature and complexity. Moreover, the original reason for its enactment no longer exists. Therefore, the bill would repeal section 809. Section 815 was enacted in 1959 along with other changes to the taxation of life insurance companies. The 1959 changes permitted life insurance companies to defer tax on one-half of their underwriting income so long as such income was not distributed to their shareholders. The tax deferred income was accounted for through ``policyholder surplus accounts.'' In 1984, Congress revised the taxation of mutual and stock life insurance companies and as part of these revisions, stock life insurance companies were no longer permitted to defer tax on one half of their underwriting income or add to their policyholder surplus accounts. At the same time, Congress did not eliminate the existing policyholder surplus accounts or trigger tax on the accrued amounts but instead left them in place. Thus, the amounts in those accounts remain subject to tax only when a triggering event occurs (for example, direct or indirect distributions to shareholders). Since 1984, little revenue has been collected under this provision as companies avoid triggering events. The Administration recently has proposed taxing the amounts in the accounts, creating uncertainty for companies with these accounts. Finally, only life insurance companies that were in existence in 1984 even have these accounts. The bill would repeal this provision. Elimination of these complicated and outmoded provisions will provide greater certainty to the taxation of these companies and allow them to restructure their businesses to compete in the developing global financial services marketplace. While this bill is only a modest attempt to simplify the taxation of one sector of our economy, it represents a first step towards overall simplification of our Internal Revenue Code. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. MOYNIHAN

Mr. MOYNIHAN. Will the Senator yield for a question?

Mr. MOYNIHAN. Does he not recall that in 1980 the Office of Management and Budget projected a large surplus for the Federal budget in the coming 5 years?

Mr. MOYNIHAN. Just as we were plunging into the deepest deficits?

Mr. MOYNIHAN. Mr. President, I say to the Senator, this is not, sir, double taxation. This is the normal taxation of retirement benefits.

Mr. MOYNIHAN. I yield back. Amendment No. 3828

Mr. MOYNIHAN. Will the Senator defer to me for just 3 minutes?

Mr. MOYNIHAN. Mr. President, it is with some potential embarrassment that I stand here and say I may be the only person in the Senate who lives on a farm and has done so for 36 years. It is a dairy farm, with cows in the pasture and in the barn. The neighbors are all dairy farmers--not all, but most. Meaning no disrespect, if anyone presumes to think that the American Farm Bureau speaks for the farmers of Delaware County, they have not been in Delaware County. An insurance firm looks after a very small number of very well-to-do people. In New York State, according to Ray Christensen, who was the Delaware County Republican supervisor before he became assistant commissioner of the Department of Agriculture and Markets, the average sale price of a farm is about $257,000. Here--quite unexpected, but very welcome--in this morning's New York Times, the lead article of the business section talks about the Democratic estate tax plan. It cites Neil Harl, an Iowa State University economist who is a leading estate tax adviser to Midwestern farmers. He says that only a handful of working family farms have a net worth of $4 million. Above that, with very few exceptions, you are talking about the Ted Turners who own huge ranches and are not working farmers. Mr. Harl said he was surprised that farmers were not calling lawmakers to demand that they take the President up on his promise-- which the President has promised--to sign the Democratic bill. The article concludes: Professor Harl, the Iowa State University estate tax expert, said that he had heard many horror stories about people having to sell farms to pay estate taxes. But in 35 years of conducting estate tax seminars for farmers, he added, ``I have pushed and pushed and hunted and probed and have not been able to find a single case where estate taxes caused the sale of a family farm; it is a myth.'' I yield the floor.

Mr. MOYNIHAN. Mr. President, I congratulate the Senator from Massachusetts on his remarks. They were precise. They were telling. It is a baffling matter. Forty million Americans need a minimum wage increase and we are here on the floor talking about 2,400, who wish to avoid all the estate taxes which Theodore Roosevelt began in this Nation. At the end of the century in which he started it, we want to get rid of it. It is baffling. I yield the floor.

Mr. MOYNIHAN. Mr. President, the Senator from Montana would like to speak for, I believe, 5 minutes.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise for the purpose of offering an amendment in the nature of a substitute. I send the amendment to the desk and ask for its immediate consideration.

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

Mr. MOYNIHAN. Mr. President, a little background. In 1906, President Theodore Roosevelt sent a proposal to Congress to impose an estate tax. He justified the measure as follows. He said: A heavy progressive tax upon a very large fortune is in no way a tax upon thrift or industry as a like tax would be on a small fortune. No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax; and as an incident to its function of revenue raising, such a tax would help preserve a measurable equality of opportunity for the people of the generations growing to manhood. That is why we have an estate tax today. Congress had imposed such taxes in the 1800s, generally to fund wars, and indeed we had an income tax during the Civil War. When the need for such revenues eased, why these taxes, including the estate tax, were put aside. Theodore Roosevelt championed the enactment, on a number of times, of the measure that is in the code today. Over the years, the number of taxable estates, estate returns as a percentage of total deaths, has fluctuated, but not very much, from under 1 percent in 1935--which is the very depths of the depression of that decade--to a high of almost 8 percent in 1977, when we changed the tax to bring it back down. And the number of taxable estates today ranges between 1 percent and 2 percent, a level not that different from that of the depths of the depression. If we make no changes to the tax rules in 2006, the percentage of taxable estates is projected to be lower than today because we raised the limit. The Joint Tax Committee projects that 1.82 percent of estates will be subject to tax. We are still within that very low historic level, that was run up after World War II, and which we brought back down in 1977. It is not a principal source of Federal revenue. I think it generated $24 billion in 1998, which was 1.4 percent of Federal revenues. Absent change, it might rise to $42 billion in 2008--not even a doubling in 10 years. The bill before the Senate, H.R. 8, the Death Tax Elimination Act, would repeal the tax in the year 2010. It moves about during the next 10 years, but then it stops altogether, at which point we deal with a revenue loss of $50 billion a year. Mr. President, $50 billion, even in this momentary glow of surpluses, is a large amount of money. That is half a trillion dollars in a decade. It is much more than we should ever give away before we see whether the surplus we are projecting will actually occur, and indeed for the social reasons that Theodore Roosevelt spoke about at the beginning of the century. The Federal Government is not the only government that would be impacted by the legislation that has been sent us from the House. The estate tax provides revenue for our State governments as well. Under our Federal estate tax laws, States may enact an estate tax without increasing taxes on decedents' estates or their heirs. This is because the Internal Revenue Code provides a dollar-for-dollar reduction in Federal estate tax liability for each dollar collected by the State, up to certain limits. Almost every State has enacted such legislation, and States collect about one-quarter of all estate taxes. The Treasury Department reports that in 1997, the States collected $4.3 billion in estate taxes while the Federal Government collected $16.6 billion. Repeal of the estate tax would eliminate this source of revenue for State governments. They have not been consulted in the matter, but I cannot imagine they would be enthusiastic. Finally, we on the Senate Democratic side are concerned about the adverse effect the repeal could have on charitable contributions. We cannot be sure of it, but the Joint Tax Committee estimates that estates are expected to contribute $330 billion to charities over the next 10 years, a third of a trillion dollars. The question of how much of these contributions would continue or what portion would disappear if we abolish this tax altogether cannot be stated with any confidence, but it is the large estates that contributed the bulk of the $330 billion; $190 billion comes from estates with values over $10 million. We know this as we look around us at the great foundations, some of which date from earlier in the century but others of which reflect the accumulation of wealth in new economic activities in our age, and the estate tax surely has an influence. It should not be the principal concern for us, but it is a fact of our society. Accordingly, we propose a modification of the existing program whilst retaining the essential legislative measure. We can describe it in two numbers: $2 million and $4 million. Under our amendment, no estate with assets under $2 million would be subject to estate tax. No estate with a family-owned business or farm valued at less than $4 million would be subject to estate tax. There are very few farms that could be described with even a measure of exaggeration as a family farm worth more than $4 million. New York State is a farming State. It always has been. Ray Christensen, the Special Assistant with the Department of Agriculture and Markets, estimates that our farms sell in the range of about $257,000. I cannot imagine those in Pennsylvania, just over our border, would be very different. They are nowhere near $4 million. I cannot imagine there is such a place, save a nominal farm kept for recreational purposes on the eastern end of Long Island or in the Hudson Valley. Our proposal would increase the general exemption, which is applicable to all estates, to $1 million immediately--it is $675,000 today--and to $2 million by the year 2009. This would eliminate two- thirds of the approximately 50,000 estates currently subject to tax. In addition, our proposal would increase the exemption for family farms and family-owned businesses from $1.3 million to $2 million immediately and to $4 million by 2009. Our increase would eliminate the estate tax on virtually all family farms and 75 percent of the family-owned businesses. The measure is costly but not extravagantly so. It costs $65 billion over 10 years, compared to $105 billion under the House proposal, which we have before us. This bill, as I said earlier this week--and I repeat to my esteemed friend, our chairman--should have been referred to the Finance Committee. It was not. The Senate will learn to its cost one day that the Finance Committee has jurisdiction over these matters because we have some competence in them, and not for nothing, for example, did we bring about the 1977 measures--I was then a member of the committee--to lower the estate tax which had commenced to reach almost 8 percent of estates, which is much higher than the historic average. We are back down to where we have been through the century. I suggest, once again, that we ought to stay with a tax that has served us well. Nearly 100 years ago, Theodore Roosevelt urged adoption of a tax that would ``be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.'' To conclude, I will ask permission to have printed in the Record the lead story in the New York Times business section, Business Day: ``Despite benefits, Democrats' Estate Tax Plan Gets Little Notice.'' It goes on, in a manner one is not accustomed to read in business sections, that: Small-business owners and farmers whose Washington lobbyists are ardent backers of a Republican-backed plan to repeal the estate tax seem largely unaware that-- The Democratic proposal-- would exempt nearly all of them from the tax starting next year. As against the measure we have from the House. I will read one paragraph and then conclude: Two prominent experts on estate taxes said yesterday that the Democrats were offering a much better deal to small- business owners and farmers, because the relief under their bill would be immediate and the estate tax would be eliminated for nearly all of them. That is a matter we might keep in mind. I ask unanimous consent that this article be printed in the Record.

Mr. MOYNIHAN. Mr. President, I see that my esteemed chairman has risen. Accordingly, I yield the floor.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I believe it is probably the case, although we are not supposed to mention such things on the floor, that the family may be present. I welcome them and congratulate the Senator on such a fine progeny.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, as those who were present will recognize, Monsignor Peter Vaghi is a member of the Senate family. He served here some years ago as the assistant to our esteemed and beloved brother, Pete Domenici. He is now the pastor of old St. Patrick's, or St. Patrick's Church on 10th Street, in the city, which is the oldest denominational church in the Federal city. It was founded in 1794 to provide for the religious needs, in the main, of Irish construction workers building the White House and the Capitol. Then came the Italians who were recruited for Jefferson's Marine Band, which was the principal source of culture and enthusiasm in the city in those days. When the British arrived with their horrendous purposes-- corresponding exactly, I have to say, as a New Yorker, to the New York forces, which rode across Lake Ontario and burned the city of York, then their capital, what we now know as Toronto--in the manner of the military of those days, they responded. There were a sufficient number of British troops in town for a period that they, too, went to St. Patrick's. It has been a long relationship with the Nation's Government, as well as the parish--in no sense to make an issue of the matter, but simply to record a certain amount of patience. Monsignor Vaghi is, of course, a Roman Catholic. The Roman Catholic ministers are descendents of the one Roman Catholic Chaplain we have ever had in the Senate, Rev. Charles C. Pise, who served a year, as was the practice, from 1831 to 1832. There descended on the Nation a spell of religious fanaticism--if you like that term, if you accept that term--which we associate with the ``know-nothings.'' When they were asked what they were doing about these matters, they would respond, ``I know nothing.'' And for a period of about 40 years--up to and including the Presidency, one regrets to say, of Ulysses S. Grant--the anti-Catholic forces in this country were quite alarmed and, if not ubiquitous, to be found in most places. We have a curious debt to those people, which is the Washington Monument, as designed by Mills. It was to be the great obelisk, but it also was to be surrounded at the base with prancing stallions, such that we would never see the pristine statement that we now have. It was built with voluntary contributions by the Washington Monument Association. You can see them if you walk up; there are bas-reliefs inside saying who contributed. In 1854, Pope Pius IX contributed a block of marble from the Temple of Concord in Rome, and a group of alert citizens learned that the installation of this block of marble was to be the signal for the Catholic uprising, and they broke into the stoneyard and dumped the block of marble somewhere in the Potomac. There was a measure of scandal, and the stump just stayed there indefinitely--until 1880. The Congress got nervous about the matter as the Centennial was coming, and the Corps of Engineers was dispatched to finish the job, which they did. You can see a change in the color about a quarter of the way up. But also we were spared the prancing stallions, so there is some good that comes of all these things. It is just such an honor to have the Monsignor with us. I speak as one of his parishioners. His family, Mr. and Mrs. Vaghi, are in the gallery today, as is Father Murphy and another parishioner. We welcome them. Although we are formally not supposed to acknowledge that anybody is up there, I think no one will mind on this occasion. It is very fortunate for us to have him today. We thank him. We will spare him the debate that now commences with my dear friend, Senator Roth, one long day of the death tax. With that I thank him, I thank the Chair, and I yield the floor.

Mr. MOYNIHAN

Mr. MOYNIHAN. I move to lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 3732

Mr. MOYNIHAN. Mr. President, 50 Nobel laureates signed an open letter to President Clinton on July 6, 2000, urging him to reject a proposed $60 billion missile defense system. I ask that the letter may be printed in the Record.