Due to the current tax on estates, less than half of all family-owned businesses and farms survive the death of the owner and only five percent survive to the third generation.  Under current tax law, it is actually cheaper to sell a business before dying and pay the capital gains tax than it is to pass that business or farm down to his or her children.  As a parent, I know how important it is to work hard so that our children can enjoy a better life.  Passing a successful farm or business on to our children and grandchildren should be a joy, not a liability.  The death tax has been hurting American small business owners and family farmers long enough.  It is past time to reduce it. 

As you all know, our economy is in a period of unprecedented growth and our employment rate is at record highs.  Thanks to the fiscal discipline of the Republican-led Congress, we are enjoying historic budget surpluses which have enabled us to pay down the once crippling public debt.  By paying off this debt and fostering a strong economy, we have made it possible to lower the high estate tax rate and prevent it from killing future generations of small businesses and family farms.

The amount of money spent complying with, or trying to circumvent, the death tax is staggering.  The Joint Economic Committee of Congress reported that the death tax brings in $23 billion in annual revenue or 1.4% of all federal revenue.  However, it costs the private sector another $23 billion in compliance costs.  That makes the total impact on our economy a whopping $46 billion.  When one calculates the amount of money spent on complying with the tax and the number of jobs lost because family businesses being sold or the resources directed toward estate planning, it is no wonder that a groundswell has formed to lower the rates on this punitive tax.

What makes the death tax so unfair is that it is a form of double taxation.  Let me explain.  Small business owners and family farmers pay taxes on their assets throughout their lifetime.  At the time of their death, the value of their property is reassessed.  Once completed, their heirs are handed a tax bill based on the newly assessed value.  This, my friends, is like giving a birthday gift to a relative, on which you already paid a sales tax, and have the recipient receive a bill from the IRS forcing him or her to pay a tax on its value.  This is absurd, but that is how the death tax works.

This week, Republicans in the House led an effort to reduce the estate tax rates contained in this unfair portion of the tax code so that family businesses and farms can be passed down from one generation to another.  H.R. 8, the Death Tax Elimination Act, would, if enacted, reduce over a 10-year phase in period, the current 55% tax rate levied on inheritance to the maximum income tax bracket of 39%.  Under the bill, inheritance would be taxed as income rather than under a separate system.

No one should have to meet the undertaker and the IRS all on the same day.  The time is now to reduce the federal death tax.  I ask my Democrat colleagues and President Clinton to join us in this effort.    It has been said that two things in life that are constant -- death and taxes.  While we cannot do much about death, we can, and will reduce taxes. 

Before I let you go, please remember that June14th is Flag Day.  I encourage each of you to show your patriotism by displaying the flag which has withstood the storms of war, waved proudly in peace and now serves as a beacon of liberty for all who view it.

Thank you for listening, 

I am Congressman Cass Ballenger.