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April 13, 2000, Thursday

SECTION: PREPARED TESTIMONY

LENGTH: 1083 words

HEADLINE: PREPARED TESTIMONY OF PATRICIA M. SOLDANO THE CENTER FOR THE STUDY OF TAXATION

BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS

SUBJECT - THE HELMING NATIONAL CONSUMPTION TAX PLAN

BODY:
I am here today as the President of The Center for the Study of Taxation, but more importantly as someone who has heard from numerous families about the effect that the gift, estate and generation skipping tax ("the death tax") has had on them and their businesses. Allow me to share some death tax facts and horror stories.

Most of you are already familiar with how the death tax effects mid to small sized businesses because you have heard from those families but you may not be aware of just how much it hurts. The facts show that 88% of the revenue generated by the death tax comes from estates $20 million or less! So yes, the very wealthy are generating some of this revenue but most of it comes from families who own small and medium sized businesses that cannot afford to pay the tax upon the death of a family member without selling off most of the bequeathed assets. To pay a tax because someone dies, at the highest rate in our tax system, on assets that have already been taxed is the reason that 69% of the general public believes the death tax is unfair. More unfair than payroll tax, income tax, gasoline tax, sales tax, property tax, cigarette tax, alcohol and beer tax, or even the capital gains tax. Why is the death tax so unpopular? Because it is a tax on "the American dream."

Hardworking entrepreneurs who build their family businesses and support our nation's economy, hope that someday they will be in a position to will their life's work to their children without paying a 55% tax.

Within the last few years many new voices have called for the elimination of the death tax including:

National Association of Women Business Owners National Black Chamber of Commerce National Indian Business Association US Hispanic Chamber of Commerce US Pan Asian American Chamber of Commerce National Association of Neighborhoods Texas Conference of Black Mayors

These minority groups have just started to build their businesses and they want to be able to give to their children the benefits of their years of hard work without a 55% gift tax or an 80% generation skipping tax if they wish to gift to their grandchildren. And they are represented by (among others) 47% of the female Members of Congress who support repeal of the death tax, as co-sponsors of the bipartisan Dunn-Tanner bill, HR8. These women and minorities are real people who are adversely impacted by the death tax. Money that they could use to send their children to college or to pay other family expenses is instead matched by Washington. One unlucky victim of this tax, Lynn Marie Hoopingarner of West Hollywood, CA writes to us, "My family has recently experienced a triple tax. My grandfather paid income taxes on his income when he earned it. When he passed away two years ago it was taxed again. My mother then suddenly passed away this past spring and we were taxed again. Effectively an 88% tax rate."

In addition to the inherent unfairness and inappropriateness of the death tax, it actually costs the American economy and jobs. Yes, the death tax eliminates jobs. How many?

* In a survey done last year by The Center for the Study of Taxation and Public Policy Institute of New York, 365 businesses that responded to a survey have already lost 14 jobs per business in the past five years due to the cost of planning and paying the death tax, that is 5,100 jobs just within those 365 businesses and they anticipate losing on average 80 jobs per business in the next S years, or in excess of 15,000 jobs just within the survey group. In a recent survey of members of the National Association of Business Owners, (NAWBO) there were similar results. Within the survey respondents of 272, on average 39 jobs have been lost in the past five years per business or 11,000 jobs in total and 103 are expected to be !ost in the next five years for a total of 28,000 jobs.

Carri Bell, a NAWBO member, who owns a business in Oklahoma City, wrote on her response, "I just settled my father's estate and paid 3/4 of the total estate for taxes and fees. Sold all of our stock and bonds and had to borrow. When I die there are no disposable assets left- so the business will have to be sold."

The death tax also impacts our global competitiveness. Since the United States has the second highest death tax rate in the world, second only to Japan at 70%, the death tax affects the competitive advantage of US companies. Family businesses have to plan for the death tax by buying expensive life insurance, selling assets, borrowing, or restructuring their businesses. It is expensive, time consuming, energy wasting and constant, year after year. Many small to mid sized family businesses sell out to larger corporations who are not faced with the death tax ending the opportunity of the family to carry on the business and livelihood of the family.In closing I would like to tell you the story of Ida Prichard of Seattle, Washington in her own words. She writes: "I am 77 years old. My history of work, thrifts and efforts to save money is unbelievable. Here is my reward! All of my social security (plus more) goes for income tax. I live off my teacher's pension, as I do not want to cash my investments. If I died today, I'd pay about $200,000 in death tax. I am helping a great niece to go to college. I have two great nephews coming up. All are bright children. I would like to help them- not the IRS. I had a newspaper route in college. I worked for 50 cents an hour doing office work under the program set up by President Roosevelt. I have lost money in investments. I went to work when I had a death sentence with lung cancer in 1967. I didn't miss a day when I was told I could only live three months at the most. I am still working. I have a tenant and I tutor ESL students. I do almost all my own work and cooking. I have never had a bill I didn't pay on time. The way things are now what the nursing home doesn't get (if I'm that unfortunate) the IRS will! What did I make all this effort for? Our laws need to be changed but I have no clout!"

Gentlemen and gentlewomen of this committee, I urge you to repeal the death tax. Let's show the American people that their government has a heart. Let's show the hardworking American people like Ida Prichard that they can pass away knowing that their life's hard work will benefit their families. And finally, let's show them, the so called "little guys" that they do in fact have clout and that their government is listening.

Thank you.

END

LOAD-DATE: April 14, 2000

Document 18 of 46.


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