Chairman Archer, I want to commend you for your leadership in holding these hearings today, and I welcome the opportunity to talk about the urgent need for repeal of the death tax.
Mr. Chairman, this tax raises less than 1% of federal receipts. It is not paid by the rich and those who can afford the fancy lawyers and accounts needed to legally avoid the tax. It is paid by the small businessman and the farmer and by those who work for these individuals who pay a 100% tax when they lose their jobs as businesses are liquidated.
Having introduced legislation in each of the last three Congresses to kill the death tax, I am proud to report that support has grown as the American people recognize the danger this most unfair tax poses to them and their families. They realize that the death tax is unfair, confiscatory, and contrary to the values of hard work and saving on which this country built its success. In 1993, when I first introduced the Family Heritage Preservation Act, my bill had only 29 co-sponsors in the House and had not been introduced in the Senate. Today, the same legislation is endorsed by 168 members of the House and 30 members of the Senate.
As far back as 1982, the voters of California sent this message to their state legislature when they overwhelming supported Proposition 6, which repealed the California state inheritance tax. Nearly 65% of the voters in the most populous state in the nation repealed their state inheritance tax by popular initiative. Proposition 6 not only repealed these onerous taxes, but it stipulated that the state legislature could not reimpose this state death tax unless another popular initiative of the people instructed it to do so. Mr. Chairman, the people in my state could have tried changing the details of the law, they could have raised exemptions or lowered rates, but instead they wisely chose to do away with state death taxes completely.
Numerous states like Iowa have followed California's lead, and many other states like Pennsylvania are beginning to follow suit. Foreign nations like Israel, Australia, and Canada, which are not considered to be low-tax nations, have repealed their death taxes due to the social and economic harm they cause. I have received thousands of petitions that represent just a fraction of the millions of Americans who, like Californians in 1982, are fed up with the death tax.
Support for repealing the death tax transcends the usual boundaries that often seem to divide us. Democrat and Republican, rich and poor, white and black, people around the county want to kill the death tax. The death tax is not an issue of class warfare or left-leaning versus right-leaning economists--everyone agrees that the death tax seeks to repeal the most basic of human natures, the desire to provide for one's family and loved ones.
We are familiar with the concept of a sin tax, a government levy on goods like cigarettes and alcohol. "If we have to tax something," states the logic behind such taxes, "why not tax behavior that is damaging to society and individuals?" The death tax is the opposite of a sin tax--it is a virtue tax. Self-professed liberal scholar Edward McCaffrey labelled the death tax as a tax on virtue because it taxes exactly the kinds of behavior we consider to be virtuous and want to encourage: savings, investment, and most importantly, work.
After you have worked to put food on the table, clothes on your back and a roof over your head, the most powerful reason to continue to work is to provide for your family and those you care about. You want to work hard to make life easier for your children. Yet the death tax thwarts this basic human instinct. While you may have worked hard, taken risks, built a business, and paid your taxes, you discover that at the end of the line, Uncle Sam stands between you and your loved ones and demands up to 55% of everything you have left.
I will leave it to other witnesses here today to testify about the many economic benefits resulting from repeal of the death tax, but I want to take a moment to highlight a few of these, paying particular attention to the erroneous notion that repeal of the death tax will leave the federal government starved of revenue. When we consider the role death taxes play in tax revenues it is important to keep several points in mind:
Some have suggested that we should again merely modify the death tax instead of repealing it outright. But this won't change the underlying incentives against hard work; it will simply add yet another layer of bureaucracy and regulation to what is already one of the most litigated and contentious areas in the entire tax code. Last year, in testimony before this Committee, one witness testified that this "mend it, don't end it" approach to the death tax would actually add $3 billion in new litigation and accounting costs to the current system as families and businesses try to structure their assets to meet the new standards.
We have the opportunity to simplify the tax code, to cut an entire section of the law that punishes savings and investment, punishes hard work, breaks up family businesses, and makes the next generation keep trying to climb the same rung of the economic ladder. The death tax is contrary to our principles, it is contrary to sound economic policy, and it should die.
I'd like to close with a story that illustrates that the death tax is not merely destructive but immoral. I was talking with a city council representative in one of the cities in my district. The city council is a part-time job, and this man is an estate tax planner and a tax lawyer in his real life outside politics. He came up to me and he thanked me for my efforts to repeal the death tax and shared with me his experience as a tax lawyer. The day before, he said, he spent several hours with one of his clients on his client's deathbed. The man's family was waiting in the next room, but this dying man was forced to give up some of his last hours on earth to sign forms necessary to avoid the death tax. These papers created no new wealth, they were economically useless, except that they allowed this man's family to keep the wealth he had worked for them to have.
So this man signed the papers, but he was deprived of some of his last moments with his family. The government got no money. The tax lawyer got paid, and he came to his Congressman and complained that this is not what the government of the United States of America should do to its citizens during their final moments on Earth. I think that in this we must all agree.
The death tax deserves to die, and I thank the Committee for providing me this opportunity to testify.