August 5, 1976
Page 25954
Mr. KENNEDY. Only the wealthiest individuals in the country. In 1974, only 7 percent of the decedents paid any estate tax. The present $60,000 exemption thus already insures that 93 percent of estates incur no Federal estate tax liability. Increasing the estate tax exemption to $197,000 would mean that only 1 percent of estates would pay any Federal estate tax. It is anomalous that the wealthiest country in the world now imposes an estate tax on such a small percentage of its wealthiest citizens. It is even more anomalous that an effort is under way to drastically reduce even this low percentage. In this period of severe budget pressures, a proposal to provide estate tax relief for the wealthiest families in the country reflects the wrong priorities.
Mr. MUSKIE. What would be the impact of the committee amendment in terms of lost revenue?
Mr. KENNEDY. The committee proposal would cost $2.2 billion annually. This would mean that the revenue yield of the estate tax would be reduced by 30 percent — from $7 billion to $4.8 billion. The committee proposal would reduce by almost one-third the effectiveness of a tax designed to limit the transfer of excessive accumulations of wealth in the country.
Mr. MUSKIE. Would the committee amendment have any adverse impact on charitable bequests?
Mr. KENNEDY. I believe the committee amendment could result in a significant reduction in bequests to charitable organizations. The recent report of the Filer Commission on Private Philanthropy and Public Needs indicates that charitable bequests — especially bequests to colleges and universities and social welfare organizations — are highly responsive to tax rates. If so, the proposed increase in the estate tax exemption would mean that decedents with taxable estates up to $197,000 would have no tax incentive to make bequests to charities. Yet, the decedents who will primarily benefit from the committee proposal account for almost one-third of the total current bequests to charity. Thus, the committee's proposal may reduce future charitable bequests by significant amounts, at a time when charities cannot afford the loss.
Mr. MUSKIE. Does the distinguished Senator from Massachusetts believe the committee amendment with its multi-billion dollar revenue cost is necessary to preserve family farms and small businesses?
Mr. KENNEDY. No; I do not. Very little of the tax relief under the committee proposal would actually go to farmers and small business persons. Over 70 percent of estate assets consists of publicly traded stock in large corporations. Thus, the committee proposal primarily benefits wealthy stockholders. To assist small farms and small businesses, it is neither necessary nor desirable to provide an across-the-board reduction in estate taxes for others. Farms and small businesses deserve relief. No farm or small business should have to be sold to pay estate taxes.
My amendment would provide the same full relief as the committee proposal for farms and small businesses, but it would eliminate the unjustified benefit for others. In both cases, reforms can be achieved without destroying the principle of a fair estate tax, without providing unnecessary windfalls to the wealthy, and without adding to the Federal budget deficit.
Mr. MUSKIE. I would ask the Senator one final question concerning the committee amendment. Is it justifiable as a measure to correct the estate tax exemption for inflation?
Mr. KENNEDY. No; it most certainly is not. The historical reasons for the $60,000 exemption do not necessarily require the level to be indexed for inflation. Just because the exemption was set so that the estate tax covered only 2 percent of estates up to 1950 does not mean that only 2 percent should be covered today. As with other proposals for indexing and inflation adjustments, the move would benefit only the wealthy — it would not in any way help others of more modest means, whose assets and income have also declined in real value as a result of inflation.
Mr. MUSKIE. I thank the Senator for his clear responses which I find convincing. I believe his proposal will relieve these estate tax burdens on small businessmen and family farms — those truly in need of some relief — while not overly reducing estate tax revenue collections.
Therefore, I will vote for the Senator's amendment.