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Mr. ROBERTS. Mr. President, I rise to share my concerns over the proposed changes in the estate and gift tax provisions of the current Tax Code that will be considered within hours on the floor.
Similar to much of the Tax Code, the estate and gift tax provisions are terribly complex, costly to comply with, and have very serious negative consequences. These negative consequences disproportionately harm farmers and ranchers and worry their lenders.
Visiting with farmers and stockmen today--livestock producers--one had better stand back. They are upset, they are frustrated, they are angry, they are concerned, and they are worried.
All across farm country, we are suffering from a severe drought--which is a real emergency, historic in scope and damage, particularly for our livestock industry. Congress should respond. At the same time, they are facing a farm bill that is in limbo, regulations that defy any commonsense cost-benefit yardstick, and no farmer or their lender can plan in this environment. In farm country, there is no certainty.
But just to split the shingle, now we have proposed changes to the current estate tax--the infamous death tax--all based on a select few in Washington deciding who is wealthy, what is a fair share people should pay in a tax and how they should pay that tax, playing again with the politics of envy and class warfare. I think we ought to quit this business. The classic example is that under current law, the Federal estate tax is set at 35 percent on estates over $5 million.
If nothing is changed, on January 1, 2013--or if Senators vote for a particular version of the two tax bills we are going to be considering in just about 1 1/2 hours--if nothing is changed, the estate tax exemption will drop from $5 million to $1 million and the estate tax rate will jump from 35 percent to 55 percent.
If we do not act to extend the current death tax structure--I would like to eliminate it; I would like to repeal it but at least extend it--the Joint Committee on Taxation reports that over 10 years, the number of small businesses subject to the death tax will increase from about 1,800 folks to 23,700, and the number of farming estates subject to the death tax would increase from about 900 farmers and ranchers to 25,200. That is more than 20 times additional farming estates that would be hit with this massive death tax hike, a 2,000-percent increase.
It is not just farmers and ranchers who would be affected. Nine times more small businesses would be hit with this massive death tax--a 900-percent increase. Twelve times more taxable estates would be hit--a 1,200-percent increase. While I support permanently repealing the death tax, if we cannot achieve that goal, how we structure this tax in particular has immediate real-world implications for folks in Kansas and across the country.
The looming 2013 change to the estate tax law would be a huge disservice to agriculture because it is a land-based, capital-intensive industry with few options for paying estate taxes when they come due.
The current state of our economy, coupled with the uncertain nature of estate tax liabilities, makes it tremendously difficult for family-owned farms and ranches to make any sound business decisions. They are on the sidelines of our economy. They are not on the economic playing field. Again, there is no certainty.
Obviously, raising the estate tax burden will strike a blow to farm and ranch operations trying to transition from one generation to the next. A $1 million exemption sounds like a lot. To some people in this Chamber--and obviously to some people within this administration--at $1 million a person is rich, they are wealthy, with no consideration as to what the personal situation is for that individual, but somebody just determining what a fair share is and then taking from that individual and redistributing to those whom they think deserve it.
But a $1 million exemption is not high enough to protect a typical farm or ranch able to support a family. When coupled with a top rate of 55 percent, that is going to be especially difficult, if not impossible, for farms and ranches and businesses to pass on their wherewithal to the next generation.
Yet our Nation's estate tax policy is in direct conflict with the desire to preserve and protect our Nation's family-owned farms and ranches. Individuals, family partnerships, and family corporations own 98 percent of our Nation's 2 million farms and ranches. When estate taxes on an agriculture business exceed cash or other liquid assets, many surviving family partners will be forced to sell land, buildings or equipment needed to keep their businesses operating.
With 85 percent of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax. Recent increases in agricultural land values--on average, 25 percent from 2010 to 2011--have greatly expanded the number of farms and ranches that now top the estate tax exemption. How on Earth can farmers, ranchers, and small businesses even plan for this?
In order to keep farm or ranch businesses operating after the death of the owner, families must plan for the estate tax. But under the majority party bill we will vote on shortly, many more farmers and ranchers will face increased filing, paperwork, and other hassles in planning for succession, not to mention lawyers, CPAs, and estate planners. In fact, if we don't extend the current estate tax, estates required to file paperwork with the IRS rise from about 8,600 to 107,500. That is a lot of time and cost that could be avoided.
The planning costs associated with this tax are not only a drain on business resources but also take money away from the day-to-day operations and investing in the business. Even with planning, uncertain tax law combined with changing land values and family situations make it impossible to guarantee that an estate plan will protect the family farm or ranch. This not only can cripple a farm or ranch operation, but it hurts all throughout our rural communities, up and down Main Street, every business that agriculture supports.
The death tax is one of the worst offenders in bringing real complexity to the Tax Code, and I believe it is one of the most distortive provisions in our system.
Some believe and will point out that the estate tax is an instrument of social justice; that it is designed to
limit wealth accumulation and to spread that wealth around, something I think that is contrary to what this country is all about.
Why do you work? You work hard to make a difference, and you work hard because you enjoy the work and hopefully you get paid for it--and, hopefully you get paid for it enough that you can at least have enough wherewithal so your kids and their kids can continue that kind of endeavor if they so choose. But some people say we want to spread that wealth around.
Even if someone holds what I consider a socialistic view--a tough word; it is a pejorative, I know, but I think that applies here--the estate tax, which distorts no end of economic decisions, isn't the most efficient method to redistribute wealth. If you are a wealth redistributor, if you will, in this body, clearly taxpayers facing the death tax respond to the tax by cutting back on investments, consuming more of the capital and other assets that could be passed on to build businesses.
So the disincentives the death tax creates in the end lead to lower growth, fewer jobs, and less savings. How do we redistribute that? There is nothing to redistribute. In a troubled economy, this forced outcome does not make sense.
Being able to plan for the future is critical. The current uncertainty leads to the repeated provisions of wills and trusts, which burdens taxpayers and advisers alike. I don't care what farm organization I am talking to, what commodity group, what small business group, wherever I go in my State of Kansas--and I think it is the same in regard to other States that Members are privileged to represent--over and over, I have been asked again what Congress will do with these provisions: What should a rancher do? How can they pass farms on to their children?
I have even been asked, for planning purposes--I am not making this up--if this is a good year to die. That is astounding, if not outrageous. It may be a good year to die because this egregious change is going nowhere.
These two bills we are considering in just a few moments are not going anywhere. We will vote in a little while, but they are both subject to a point of order--not having originated in the House, they will be blue-slipped. That is a fancy word, a parliamentary word, saying they are going nowhere because bills on taxes have to originate in the House. Talk about a real income redistribution--a nothing burger. That is what we are considering. But it is indicative of what is being considered in this Chamber and indicative of what we have to take care of in true tax reform.
Folks in Kansas should not have to make such important decisions on a tax law that is changing all the time. We need to repeal or permanently reset the death tax. If this tax cannot be repealed, it needs to be set in stone--hopefully, not a gravestone--and at a rate and in a manner that provides certainty.
While it is important to permanently eliminate this very punitive tax, until this can be accomplished, Congress should at least extend the current $5 million exemption, indexing it to reflect land values and continuing the spousal transfer and maintaining the top 35-percent tax rate.
We pay taxes all of our lives. It just doesn't make sense to be taxed again when we die.
I suggest the absence of a quorum, although I note that my colleague from Illinois is perhaps ready to speak. I will be happy to yield back any time I have.
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