[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE BURDEN OF THE ESTATE TAX
ON FAMILY BUSINESSES AND FARMS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SELECT REVENUE MEASURES
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MARCH 18, 2015
__________
Serial No. 114-TP01
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
PAUL RYAN, Wisconsin, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan,
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
DEVIN NUNES, California JIM McDERMOTT, Washington
PATRICK J. TIBERI, Ohio JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts
CHARLES W. BOUSTANY, Jr., Louisiana XAVIER BECERRA, California
PETER J. ROSKAM, Illinois LLOYD DOGGETT, Texas
TOM PRICE, Georgia MIKE THOMPSON, California
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois RON KIND, Wisconsin
LYNN JENKINS, Kansas BILL PASCRELL, Jr., New Jersey
ERIK PAULSEN, Minnesota JOSEPH CROWLEY, New York
KENNY MARCHANT, Texas DANNY DAVIS, Illinois
DIANE BLACK, Tennessee LINDA SANCHEZ, California
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
Joyce Myer, Staff Director
Janice Mays, Minority Chief Counsel and Staff Director
______
Subcommittee on Select Revenue Measures
DAVID G. REICHERT, Washington, Chairman
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
ERIK PAULSEN, Minnesota JOHN B. LARSON, Connecticut
TOM REED, New York LINDA SANCHEZ, California
TODD YOUNG, Indiana MIKE THOMPSON, California
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
C O N T E N T S
__________
Page
Advisory of March 18, 2015 announcing the hearing................ 2
WITNESSES
Mr. Brandon Whitt, Batey Farms................................... 6
Mr. Robert E. McKnight, McKnight Ranch Co........................ 12
Ms. Karen Madonia, Chief Financial Officer, Illco, Inc........... 18
Ms. Ray Madoff, Professor, Boston College Law School............. 24
SUBMISSIONS FOR THE RECORD
Associated Builders and Contractors, Inc. ABC, statement......... 191
American Farm Bureau Federation, AFBF, statement................. 192
Independent Electrical Contractors, IEC, statement............... 198
National Grocers Association, NGA, statement..................... 200
National Lumber and Building Material Dealers Association,
NLBMDA, statement.............................................. 202
Small Business Legislative Council, SBLC, statement.............. 204
Tire Industry Association, TIA, statement........................ 209
THE BURDEN OF THE ESTATE TAX
ON FAMILY BUSINESSES AND FARMS
----------
WEDNESDAY, MARCH 18, 2015
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Select Revenue Measures
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:11 a.m. in
Room 1310 Longworth House Office Building, the Honorable David
Reichert [Chairman of the Subcommittee] presiding.
[The advisory of the hearing follows:]
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Chairman REICHERT. Good morning, and now we have entered
into the subcommittee hearing on the burden of the estate tax
on family business and farms.
Today, as we consider the burdens family businesses and
farms face planning for and paying the estate tax, or, as it is
more commonly known, the death tax, we will have the
opportunity to hear from witnesses who have experienced this
challenge first-hand.
Thank you to our guests and our witnesses for joining us
today for this important hearing, and for sharing your stories.
The story is the same in all of our districts, I would
imagine: family businesses, business owners, and farmers work
hard their entire lives with the goal of passing on the fruits
of their labor, but face the sometimes insurmountable burden
and hurdle of the death tax. And, in addition to the actual tax
liability the death tax imposes, merely planning for it,
regardless of whether these businesspeople and farmers end up
owing it, is yet another challenge that we will hear and
discuss today.
In fact, as I am sure many of my colleagues have also
heard, I consistently hear from local businesses about how this
unnecessary tax threatens the livelihood of families. In my
home state there are numerous examples of the harmful impact of
the death tax.
In Seattle, permanent relief from the death tax is critical
for family-owned businesses like the Seattle Times, which is a
fourth and fifth-generation family business. And, in my own
district, in Issaquah, Washington last year, a family had to
make the difficult choice to sell their farm which had been in
the family for over 120 years. This is a devastating decision
to have to make, and they are not alone in making it.
I thank Congressman Kevin Brady for his work to provide
much-needed permanent relief to families across the country,
I'm proud to be a cosponsor of this legislation to repeal the
death tax once and for all. I look forward to hearing from
today's witnesses this important issue.
Chairman REICHERT. Mr. Neal, would you like to make an
opening statement?
Mr. NEAL. Thank you very much, Mr. Chairman. And thank you
for calling the topic today before us. I want to also
congratulate you on becoming the chairman of the Subcommittee.
As you know, being chairman of this Subcommittee leads to great
thing. Former alumni include Chairman Camp, Chairman
Rostenkowski, and Chairman Rangel. And former Chairman Tiberi
isn't so bad, either.
[Laughter.]
Mr. NEAL. Speaking of which, I have enjoyed working with
your predecessor, and I look forward to working with you.
We are here this morning to discuss the estate tax, which,
for all the recent histrionics around the topic, has been, in
one form or another, a part of the Tax Code since the days of
our founding fathers. Whether used by John Adams to defend our
democracy against a foreign threat, or by Lincoln to unite us,
an inheritance tax has been recognized as a legitimate way to
fund government operations and prevent concentrations of
wealth.
While the estate tax, or the inheritance tax, is necessary
to fund the government, perhaps more importantly, the estate
tax is necessary to our democracy. As our founding fathers
observed, you simply cannot have democracy in a nation with
extreme economic inequality and wealth concentrated in the
hands of the very few. Mr. Jefferson noted, citing Adam Smith,
that ``A power to dispose of the states forever is manifestly
absurd; the earth and the fullness of it belongs to every
generation, and the preceding one can have no right to bind it
upon posterity.''
Such extension of property is quite unnatural. There is no
point more difficult to account for than the right we conceive
men to have to dispose of their goods after death. This
sentiment has been adopted in various forms throughout our
history by different Americans.
One might remember that it was Theodore Roosevelt who was
the first president to recommend a steep, graduated tax on
inheritance. He, in fact, invited to the White House those to
inform them that he was about to do it. More recently, Warren
Buffett, George Soros, and Bill Gates, Sr. have all come out in
strong support of maintaining a robust estate tax to prevent a
concentration of wealth.
Today's hearing is an important one in this ongoing debate
about the necessity of the estate tax. Today's panelists
represent wide-ranging views on the topic, and each should have
their views heard. Some of the small businesses, farms, and
farmers represented here today have legitimate concerns about
being able to make ends meet. And, as I understand it, many
farmers and small businesses find themselves asset rich but
cash poor. Combines, tractors, and plows are not cheap, and are
big investments that farmers rely upon to grow their business.
So, I should point out that I think that there ought to be
a way for this Subcommittee to recommend and for the full
committee to embrace a notion providing some relief to farmers,
if we can figure out how to do that specifically, so that the
family maintains the interest. And I think that that is an
opportunity that we perhaps could find common ground on.
I would remind my colleagues, as we proceed to the
suggestion that we should repeal the estate tax in its
entirety, we serve in the House of Representatives, not the
House of Lords. And I think that that is a noteworthy example
of what happens over time, if we are not careful about the
concentration of wealth for those who miss the opportunity to
present Steve Jobs or Bill Gates, Jr., as well.
Congress has recognized the plight of these businesses, and
we have enacted numerous provisions to help our nation's
farmers and small businesses, whether through generous
expensing rules or accelerated bonus depreciation, both of
which I have supported. I think that this was in addition to
raising the thresholds on the estate and the gift tax. We have
gone from a $1 million exemption with a top rate of 55 percent
to a $5 million exemption indexed for inflation, with a top
rate of 40 percent. While our nation's farmers and small
businesses have legitimate concerns about the estate tax, it is
my hope that this argument this morning is not being used for
the purpose of ending the estate tax for simply America's
wealthiest people.
The facts seemingly bear this out. As the Tax Policy Center
recently revealed, only 20 small businesses and farm estates
nationwide owed any estate tax in 2013. Furthermore, they point
out that that estimate of those 20 estates owed just 4.9
percent of their value in tax, on average. This trend to small
business and former levels also corresponds for all taxpayers,
as well. As Joint Tax has pointed out, in 2013 there were 2.6
million deaths in the United States, and 4,700 estate tax
returns reporting some tax liability were filed. This means
99.85 percent of all estates owed no estate tax at all. By
comparison, in the mid-1970s, taxable estate returns exceeded 6
percent of all deaths.
Mr. Chairman, I would like to thank you for calling this
hearing. I look forward to the discussion and hearing from our
witnesses, and to seek ways to improve our current estate tax.
Remember, the estate tax is not a tax on Conrad Hilton. The
estate tax is a tax on Paris Hilton. And, incidentally, who
could be against that?
[Laughter.]
Mr. NEAL. And I call that up because I think that is a
noteworthy example of what would happen if we broadly repealed
the entire estate tax. And thank you, Mr. Chairman.
Chairman REICHERT. Thank you, Mr. Neal. Before I introduce
today's witnesses, I ask unanimous consent that all Members'
written statements be included in the record.
[No response.]
Chairman REICHERT. Without objection, so ordered.
We will now turn to our panel of distinguished witnesses.
And I would like to welcome, first, Mr. Brandon Whitt of Batey
Farms in Murfreesboro, Tennessee; second, Mr. Bobby Knight,
owner and operator of--I am sorry, McKnight--of McKnight Ranch
Company in Fort Davis, Texas; and third, Ms. Karen--help me.
Ms. MADONIA. Madonia.
Chairman REICHERT. Madonia? A chief financial officer of
Illco Company, a family-owned Chicago-area distributor of
heating, ventilation, air conditioning, and refrigeration
equipment parts and supplies. And, fourth, Professor Ray Madoff
of the Boston College Law School in Newton Center,
Massachusetts.
Thank you all for joining us today. You will each have five
minutes to present your oral testimony, and your full written
testimony has been submitted for the record.
Mr. Whitt, we will start with you. You are recognized for
five minutes.
STATEMENT OF BRANDON WHITT, BATEY FARMS
Mr. WHITT. Good morning. I certainly appreciate the
opportunity to be here. And Chairman Reichert and Ranking
Member Neal, and Members of the Subcommittee, my name is
Brandon Whitt. I operate a seventh-generation farm in
Murfreesboro, Tennessee, where I farm with my wife, Katherine,
and my father-in-law, John.
In a suburbanized area just outside of Nashville, Batey
Farms dates back to 1807. Beginning from a Revolutionary War
land grant for military service, over its 208 years the farm
has seen many faces, developments, victories, and certainly
failures. But one thing remains constant: we have strived to
uphold the principle of our family motto of preserving the past
and embracing the future.
Batey Farms is a very diverse--and includes a market that
sells fruits, vegetables, and pork we produce directly to
consumers. In addition, we farm 1,800 acres of row crops, and
250 acres of hay on our own land, and land we rent from
neighboring land owners. My wife and I manage the day-to-day
operation of our farm business, while my father-in-law, who
still works daily alongside me, owns the land that we farm. We
employ one full-time employee, two part-time, and over a dozen
seasonal workers. Over 65,000 customers pass through our farm
gate annually, and we are currently investing to expand our
agritourism attractions, so that our more--so that more of our
urban neighbors will visit and make a connection to modern-day
agriculture.
When my wife's grandmother passed away in 1998, my father-
in-law, who had farmed the land for his entire life, was faced
with a big--with a huge estate tax burden. The farm, at the
time, was a little over 600 acres. Land values were booming,
and the value of the farm had doubled over the previous 10
years. John ended up having to sell a large portion of the land
to pay estate taxes. This may not sound like much of a
sacrifice, giving up 120 acres, but it left him with 483 acres
to farm, and it completely changed the farm business. The land
was lost to development. And having houses so close to our
fields and the remaining land, it made it impossible [sic] to
continue raising cattle.
Fast-forward to today. We still farm that same land. Only
now it is easily valued at more than $25,000 per acre. Some
might say that we should sell out, start over somewhere else.
But this is not my family's plan. We believe that Batey Farms
will be a viable farm business far into the future, and we hope
that our children will be the eighth generation to farm our
land. We believe that our farm adds value to our town, to our
neighbors, and value to the open space that our customers have
value--for a local food source, and that our farm market
creates a sense of community. We intend to honor our motto, and
continue our farming business as long as we are able to.
My father-in-law, John, is now 72 years old. As we look to
the future, we can't help but worry about what will happen when
he passes away. We have spent countless hours talking with
financial advisors, accountants, and attorneys, trying to put
together a plan that will allow Batey Farms to remain a viable
business. We know that we will face an estate tax when my
father-in-law dies, and we are planning now to try to avoid
having to sell more acres to pay the tax. I can't help but
think about what our farm might be if we could have invested
all that time and energy into our own business.
My story is the story of young farmers all across the
country. Agriculture certainly looks different on farms from
state to state. But we all face the same reality that an
uncertain tomorrow can bring. We face decisions about making
long-term investments on our farms and ranches, without the
benefit of knowing the price we will be paid for our products.
We deal with unpredictable weather that can change a good year
into a bad one with a single storm.
There isn't much we can do about these risks. They are a
normal part of the uncertainty that goes along with farming.
But why should uncertainties over estate taxes be added to
these others? Our job is hard enough, as it is. I urge Congress
to abolish the federal estate tax, so that farms like mine can
better use their resources to build a stronger business, and a
better community. I urge Congress to act quickly to end estate
taxes, so that no further farmer or rancher has to sell part of
their business to pay this misguided tax.
Thank you very much for the opportunity to be here.
[The prepared statement of Mr. Whitt follows:]
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Chairman REICHERT. Thank you, Mr. Whitt.
Mr. McKnight, you are recognized for five minutes.
STATEMENT OF ROBERT E. MCKNIGHT,
MCKNIGHT RANCH COMPANY
Mr. MCKNIGHT. Thank you, Chairman Reichert, Ranking Member
Neal. I appreciate the opportunity to be here today. My name is
Bob McKnight, a seventh-generation cattleman from Fort Davis,
Texas, and certainly my privilege to appear before this
Committee today to speak on behalf of the cattlemen and women
across this country to discuss an uncomfortable issue that too
many of us have had to deal with, that being the death tax.
I am here to share my story today, so hopefully we can
leave with a better understanding of the personal impact this
has on families like mine and many like mine. Having dealt with
the death tax on multiple occasions, I can assure you it is not
easy to settle the estate of a loved one while mourning the
loss of that loved one. And then, to find out that estate is
subject to the death tax is pretty tough. How will I pay the
estate tax? We are going to have to sell off part of our
business, take out a loan, layoffs. These are all tough
questions I had to face when confronted with the death tax.
And, unfortunately, this story is more common than it should
be.
As a cattleman, the most important part of our family's
livelihood is the health and safety of our livestock. Every day
myself, our employees, we go out and put the needs of our
livestock ahead of our own. Cattle don't take a day off; we
can't, either. I am financially and emotionally invested in the
success of this operation. And I have a responsibility which I
take very seriously, and that is the care for the animals and
the people that work for us.
Our ranch is a family-owned small business located in
Southwest Texas. Like other small businesses, we have the
worries of making payroll, complying with numerous federal/
state regulations, bills, loans, taxes. I face the same
stresses every business owner out there faces, plus we have to
deal with Mother Nature. We never know what she has in store
for us.
In recent years our ranch and others have been ravaged by
wildfires while in the throes of a drought of historic
proportion. Many in Texas have been forced to liquidate their
herds--in some cases, their entire operation. The exodus of
cattle out of Texas is unprecedented. We have had some rains.
The country is going to take time to heal. To get back to our
historic numbers is going to take some time. I think we are up
to the task, but it is going to take a little time.
When times have been lean, we have had to make sacrifices
to keep our business above water, keep our employees on the
ranch. But sometimes you run out of places to cut, and you have
to make real hard choices. And that means laying off season
employees. This is exactly what happened to our family,
precipitated by the death tax. I had to let go of season
employees, and they had to seek work elsewhere.
The skill set that we need on our agriculture operations is
very unique, and it takes years to develop. And when you lose
that skill set, it is difficult, if not impossible, to replace
it. I would give anything to have those guys back. But,
unfortunately, I don't believe that is going to happen.
Many farmers and ranchers have had the same experience with
the death tax. And, even with the current exemption levels, I
believe there is a lot of angst out there with these rising
land values: Is it going to trigger a death tax?
That is why many families, I think it is imperative they
continue to invest in planning and complying with the estate
tax. And, unfortunately, that money used to do that comes off
the top. It is after-tax money spent on investing, rather than
investing in your company. And, even with an estate plan, the
best estate plans, it takes years to transfer. And, again,
compliance is not free.
As someone who has been on the negative end of the death
tax, I just have one question: What are the positive benefits
of the death tax? When faced with a death tax, I am no longer
thinking about how I am going to grow my business, hire more
employees. I am focused on where I am going to have to cut. Are
we going to have to liquidate? Are we going to have layoffs?
How are we going to control this loss? I would rather focus on
expanding our business, reinvesting in our community by
creating more jobs.
The death tax impacts more than just my family. It affects
our employees and the family businesses around us. In the small
rural communities of Texas, these family ranches have support
businesses all around them. And when you are feeling it, I can
tell you it runs through the whole community, and it is pretty
tough.
The death tax is a death warrant for far too many
businesses. I feel the best solution, the fair solution, is a
repeal of the death tax. Thank you.
[The prepared statement of Mr. McKnight follows:]
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Chairman REICHERT. Thank you, Mr. McKnight.
Ms. Madonia, you are recognized for five minutes.
STATEMENT OF KAREN MADONIA, CHIEF FINANCIAL OFFICER, ILLCO,
INCORPORATED
Ms. MADONIA. Chairman Reichert, Ranking Member Neal, and
Members of the Subcommittee on Select Revenue Measures--my name
is Karen Madonia, and I am the chief financial officer of
Illco, a Chicago-area distributor of heating, ventilation, air
conditioning, and refrigeration equipment parts and supplies.
Thank you for giving me the opportunity to talk about the
estate tax and its effect on family businesses.
As background, Illco was a very small company when my dad
bought it in 1973. At that time he was 32 years old with a
wife, 3 daughters, and a mortgage, but he knew he wanted more
than just a job. He wanted to create something permanent, to be
in control of his own destiny. With help from my grandfather,
my dad took a risk and went into business for himself. In those
early years he worked every job at the company, 7 days a week,
10 to 12 hours a day. But his passion for the industry, his
commitment to his employees, and his drive to grow his company
kept him pushing forward. And 40 years later, he has a business
that employs 97 people in 3 states, and generates $42 million
in revenue.
My sisters and I grew up understanding that if we wanted to
be successful at anything, we had to work hard and stay focused
on our goals. We are proud to work alongside our dad now, and
look forward to making our own mark on the family business in
the coming years. There is also a generation behind us just
beginning to consider career options. Perhaps some of them will
join us; that is certainly my hope. But after years of
listening to us struggle to figure out how to grow the business
while navigating the estate tax waters, I imagine all of them
will think twice before making that leap.
Proponents of the estate tax will tell you that it prevents
the concentrated accumulation of wealth in our country. They
will tell you that our nation needs to increase taxes on the
wealthy, because they need to pay their fair share. On the
surface, that is a pretty safe argument to make. It is easy to
say the solution to our fiscal issues is to increase the burden
on those who can afford it the most. But what is fair about
paying taxes your whole life, only to have to pay even more at
death, simply because you are leaving a business behind?
What is always overlooked is the effect of the estate tax
on the family business. In most cases, we are not talking about
passing on bank accounts with multi-million-dollar balances. We
are talking about businesses where most of the net worth is
tied up in inventory, accounts receivable, equipment, and real
estate.
At Illco, for example, we carry an inventory valued at $12
million and an accounts receivable of about 5 million. Our
inventory has to be high. We provide vital heating, cooling,
and refrigeration parts and supplies to hospitals, schools,
nursing homes, and grocery stores. And when that equipment
breaks down, it needs to be fixed immediately.
After paying our taxes and making our annual profit-sharing
contribution, the income that is left is put back into the
company so we can continue to carry an extensive inventory,
extend payment terms to our customers, and maintain our fleet
and our buildings. If something happened to my dad, and we were
left with a large estate tax bill, we would have to choose
between shutting down branches, laying off workers, or
liquidating inventory, just to be able to pay a tax bill that
only occurred because an owner died.
Over the last few years, my dad has spent countless hours
and entirely too much money trying to figure out how his
company can outlive him. Instead of focusing on growing his
business, he has had to strategize about how to pass his
company on to his kids without having to dismantle it. Most of
our strategic management decisions, whether they are about day-
to-day operations or opportunities to expand, involve
consideration of the estate tax in one way or another.
We have opted to maintain a large cash reserve as a
precaution. Other companies choose to protect themselves by
purchasing insurance. Either way, money that could be used to
grow and create jobs is sitting on the sidelines. The estate
tax is a huge road block to successful family businesses
undergoing generational transfers. Think about that: Perhaps
the greatest challenge in transitioning a business from one
generation to the next is our own Tax Code.
Small business owners take huge risks at great personal
sacrifice, and they truly are the backbone of the American
economy. No one is asking for it to be easy. In fact, my dad
would probably be the first one to tell you that overcoming the
challenges is probably the most rewarding part of owning your
own business. But it shouldn't be the case that the thing that
keeps you up at night is the worry that you may leave your kids
with a huge tax burden when you die.
I believe that most people would be proponents of an
overhaul to our Tax Code. There probably are too many
exemptions and loopholes that only upper-income taxpayers can
take advantage of, and those topics are worthy of a national
conversation. But taxing the estates of successful
entrepreneurs is punitive, and that is not the role our Tax
Code should play.
Two years ago, when Congress last addressed the issue of
the estate tax, you gave the small business community some
certainty by establishing an exemption and indexing it to
inflation. While we still maintained that full repeal was the
right answer, we appreciated that you understood that
constantly changing the rules made it impossible for us to
properly plan for the future of our businesses. I respectfully
ask that you again carefully consider all the ramifications of
estate tax policy, and then vote once and for all to
permanently repeal the estate tax.
It is time to encourage families to create wealth by
starting their own businesses, not threaten to take it away
from them if the government thinks they have accumulated too
much.
Thank you for the opportunity to share my family story with
you.
[The prepared statement of Ms. Madonia follows:]
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Chairman REICHERT. Thank you, Ms. Madonia.
Ms. Madoff, you are recognized for five minutes.
STATEMENT OF RAY MADOFF, PROFESSOR,
BOSTON COLLEGE LAW SCHOOL
Ms. MADOFF. Thank you. Chairman Reichert, Ranking Member
Neal, Members of the Subcommittee, my name is Ray Madoff, and I
am a professor at Boston College Law School, specializing in
estate planning and tax policy. Thank you for inviting me to
testify today, and for holding this hearing.
In my comments today, I would like to start by briefly
addressing the family farm and business issue, and then take
the bulk of my time to talk about the important role of the
estate tax, and the serious costs of repeal.
As other witnesses have testified this morning, family
farms and businesses are an important part of our society. And
I believe that we should do what we can to protect them. We
have some protections in place already. We have a large, $10
million exemption and provisions allowing taxes to be paid over
15 years. But if these are not sufficient, Congress should
address the situation with targeted solutions.
There are two possibilities that are pretty easy: one would
be to lift the cap from Section 2032(a), allowing special
valuation for land would help our farmers here; or, revive
Section 2057, but instead, provide an unlimited exemption for
family businesses and farms, insofar as they are operated by
family members. We have the statutes in place; we can easily
enact them.
However, over 90 percent of the assets subject to the
estate tax are assets other than closely-held businesses. And
the family farm and business issue should not serve as a decoy
to hide the true beneficiaries of estate tax repeal, especially
given the value of the estate tax and the cost of repeal.
The estate tax plays a critical role, in terms of promoting
fairness in our tax system, because it provides a counter-
weight to the extraordinary income tax benefits given to those
with inherited wealth. Our income tax system favors taxpayers
with inherited wealth in two important ways.
First, inherited income is entirely excluded from the
income tax system. A person who inherits $100,000 or $100
million is treated the same for tax purposes as a person who
inherits nothing. This failure to tax inherited income is
particularly glaring, in comparison to the taxes imposed on
workers, who are subject to income taxes of up to 39.6 percent,
and payroll taxes of up to 15.3 percent. Because of this
difference, a construction worker who earns $60,000 after taxes
gets less than $44,000. But if another individual inherits
$60,000, she gets to enjoy that $60,000 entirely undiminished
by taxes.
Second, those who inherit wealth also get to avoid capital
gains taxes due to the step-up in basis at death. Consider the
case of a person who had invested $20,000 in Apple stock in the
1980s. If that person died in 2015, the stock would be worth
over $4 million at the time of death. But, under our current
income tax system, no one will ever pay taxes on that $4
million of gain. This extraordinary benefit is only afforded
those who obtain property by inheritance, not by any other way.
The estate tax also provides a valuable source of revenue
for the government. While some say it isn't very much, there is
still a lot that can be done with $270 billion over 10 years,
including things like fully funding school nutrition programs,
which would provide nutritious meals to 31 million children a
day, or funding the program for free community college tuition
that would benefit more than 9 million students, which could be
funded 5 times over with this money. Even if the goal is to
reduce the size of government, surely there are other taxpayers
more in need of a tax break than the heirs of fortunes of over
$10 million.
In addition to the cost of foregone revenue, the repeal of
the estate tax would impose other burdens as well. Most
importantly, it would increase wealth inequality, as the
financial benefit of repeal would flow to America's wealthiest
families.
Moreover, these families are likely to hold on to the
wealth, as estate planners have perfected the art of protecting
inherited wealth in perpetuity, through the creation of dynasty
trusts.
Wealth inequality is not just a product of the market, but
it is significantly affected by the government policies,
especially tax policies, that allocate societal resources. Over
the course of much of the 20th century, these policies resulted
in a strengthening of the middle class. However, since the
1980s, wealth inequality has grown considerably, particularly
among those who would most benefit from estate tax repeal: the
wealthiest one-tenth of one percent of the population. In
2010--in 2012, that tiny sliver of Americans, those with $20
million or more, owned the same amount of wealth as that which
is owned by 90 percent of the population. Estate tax repeal
would exacerbate this concentration of wealth.
Wealth inequality threatens democracy. Both Thomas
Jefferson and John Adams expressed their concern about the risk
to democracy that could result from extreme wealth inequality.
Wealth inequality also hurts the economy. Studies
persistently show that high concentrations of wealth correlate
with poor economic performance.
Finally, repeal of the estate tax could have a devastating
impact on our charitable sector. We count on our charitable
sector to finance education, health care, scientific research,
art, the social safety net. And the estate tax charitable
deduction encourages charitable giving. And though the result
would not be intended, it is quite likely that repeal of the
estate tax would reduce charitable giving. Though it is
difficult to quantify this impact, even a small reduction in
charitable giving could prove devastating to the sector, and to
the individuals that it serves.
Thank you again for inviting me to testify today. I am
happy to answer any questions that you might have. And I hope
that my comments are helpful to the committee as it considers
this very important issue.
Chairman REICHERT. Thank you, Professor, for your
testimony. Thank you all for your testimony. And I am sure
Members of the Subcommittee have a few questions for you. And I
will begin with Ms. Madonia.
You have highlighted several elements of your business that
make estate planning difficult, including inventories and the
capital-intensive nature of your business. Is this typical for
businesses in your industry?
Ms. MADONIA. Yes, very typical. I mentioned in my testimony
that we----
Chairman REICHERT. Microphone.
Ms. MADONIA [continuing]. I am sorry. The parts that we
sell--refrigeration, heating, air conditioning--if a
refrigeration unit goes out in a grocery store, you have a
limited amount of time before that food is lost. If the air
conditioning system goes out in a hospital, you got to get that
up and running pretty quick, so that patients can be taken care
of.
So, we have to carry a pretty heavy inventory. When
customers come in to buy something, we have to have it on the
shelf, so they can walk out the door with it. And then there
are trucks, buildings, and warehouse equipment--there is a huge
capital investment in our industry, yes.
Chairman REICHERT. Would you say that the death tax is a
general concern for those businesses that do similar work that
you do?
Ms. MADONIA. Absolutely. We----
Mr. THOMPSON. Estate tax. It's not the death tax. It's the
estate tax.
Chairman REICHERT. Pardon me? Estate tax, yes, I am sorry.
Ms. MADONIA [continuing]. Yes. We come to Washington every
year with our trade association, and this is always the first
issue because it is an industry made up of a lot of small
family businesses. And, yes, it is top on our list every year.
Chairman REICHERT. What is the membership of your
association?
Ms. MADONIA. It is Heating, Air-Conditioning and
Refrigeration Distributors, and there are between 450 and 500
members.
Chairman REICHERT. Okay, thank you. Mr. Whitt, it appears
from your testimony that Batey Farms is facing several
pressures that are changing how you farm, including increasing
land values due to expansion of Nashville. Would you say that
Batey Farms is typical, in having to struggle with increasing
land values, and the changing nature of farming?
Mr. WHITT. Absolutely, Chairman Reichert. You know, we are,
fortunately, on the outskirts of urban life, which provide many
opportunities for our farm to connect consumers to agriculture
today. Unfortunately, that comes with an extremely large
increase in land value.
Sure, it would be great to sell out and move somewhere
else, and go buy 10 times the land, but that was never our
intent to do so. We want to have that connection in our own
personal community to share our story, to provide agriculture
to our community. I don't see--you know, estate tax in our case
is going to be a huge problem for us, because of that increase
in land value over the last several years.
Chairman REICHERT. You touched on this in your testimony,
but again I will give you an opportunity to sort of amplify
your answer a little bit. Is this driving an even greater
concern about the death tax than in years past for American
farmers?
Mr. WHITT. Absolutely.
Chairman REICHERT. And----
Mr. WHITT. As land value--not only our personal farm, but
land values in general continue to increase. So our question
is, you know, when and if things happen to that family member
now, what is going to happen? Because that death, what kind of
bill are we going to be facing because of the death? And are we
going to be able to hold on to that business?
You know, unfortunately, the only value we have is in land.
I can assure you that my investment into my community through
my expenses far outweighs my accumulation of wealth that I
accumulate on my farm.
Chairman REICHERT [continuing]. Okay, thank you.
Mr. McKnight, you said in your testimony that you are a
seventh-generation rancher. Is that common among ranchers, to
have that kind of a history?
Mr. McKNIGHT. In lots of Texas and across the country, yes.
These are old ranches that have been put together through a lot
of hard work, and it is generations just adding to it and
adding to it. And you get to a point to where the death tax--
estate tax, I am sorry--can be very tough. But, yes, these
ranches weren't put together in a day. It is generations of
hard work.
Chairman REICHERT. And you know a lot of these seventh-
generation, fifth-generation----
Mr. McKNIGHT. Seven is a long time. I know multi-
generational families, yes----
Chairman REICHERT [continuing]. Multi-generational
families----
Mr. McKNIGHT [continuing]. Three, four, five, yes,
absolutely.
Chairman REICHERT [continuing]. Would you say that the
pressures you are facing are typical for ranchers across the
United States?
Mr. McKNIGHT. Absolutely.
Chairman REICHERT. And is the death tax a constant source
of concern?
Mr. McKNIGHT. Absolutely. Yes, sir.
Chairman REICHERT. Mr. Neal, you are recognized.
Mr. NEAL. Thank you, Mr. Chairman. Professor Madoff, some
have argued that Congress should repeal the estate tax because
it serves as a double tax on income. Could you shed some light
on that argument?
Ms. MADOFF. Yes. I think the double tax argument is one of
the real misunderstandings about how the tax system works.
There are three things that are important to recognize.
First of all, the bulk of assets that pass at death have never
been subject to tax, because they are appreciated capital
assets. And, due to the step up in basis at death that I talked
about earlier, that wealth has never been taxed.
In addition, double taxation doesn't really capture
anything, because there is no principle that money that has
been taxed to one person shouldn't be taxed to another person.
If I earn money and I pay taxes on it, and then I pay money to
my mechanic for fixing my car, my mechanic can't say, ``Hey,
that income has already been taxed when Madoff earned it.''
Each taxpayer has to pay taxes.
In addition, taxpayers often pay taxes, multiple types of
taxes. You pay income taxes, payroll taxes, sales taxes,
property taxes. There is no principle of double taxation,
avoiding double taxation, in the tax system.
Mr. NEAL. Mr. Whitt, based on your testimony, if we were
able to find a way to address the land issue that you have
spoken to specifically, would that satisfy the notion that we
could accommodate you without repealing the entire estate tax?
Mr. WHITT. Well, I believe, unfortunately, then, in some
cases, yes, it could. But I think, when we look at the
difference between farms and small businesses all across this
country, where do we set that limit, there is always going to
be winners and losers in that case. And, without full repeal, I
don't see how we can be fair to McKnight and unfair to me, just
because of the differences in our businesses.
Mr. NEAL. I would say that that is the nature of the tax
system, though. There are winners and losers in the tax system.
I think we all subscribe to that basic premise, that, as you
try to shift the Tax Code around, that it is like squeezing
toothpaste with the cap on.
Mr. WHITT. Well, I don't understand why he should have to
sell part of his business, just because he is over an
exemption. Why should he have to sell his business? It is as
detrimental to him to sell part of his business, just because
he is over a limit and I am under.
Mr. NEAL. Okay. Now, just a reminder of what this Committee
has done, the full Ways and Means Committee has done, now,
just--and it is March. We have already proposed, over the
objections of some of us, $317 billion in tax cuts, unpaid for.
And the proposal here, if this were to take place, would add
$270 more billion dollars to tax cuts, unpaid for. So, that
means that this Committee, in full, well into early April,
before tax-filing season, will have proposed $587 billion worth
of tax cuts that are unpaid for.
Now, let me tie that to this argument. That means that we
will be proposing $587 billion in tax cuts, and only $567
billion of defense spending. So the same people that will argue
here we should increase defense spending, including the
President, will simultaneously argue that we should cut taxes
by $587 billion. And I would submit, as good as the arguments
are that you have all made this morning, there isn't anybody
here who could run a family farm or business based upon the
premise that has been offered by this Committee.
So, part of this is messaging that you are hearing today,
and I understand that. People make arguments, and you want to,
obviously, get those arguments to conform to a policy at some
position. But we should not miss the fundamental point that
these tax cuts, if they were to be put in place, mean that
somebody else has to pay. Because, as Mr. Whitt has correctly
noted, as you move the items around in the Tax Code, then there
are those that will pay, and there are those that will pay
less.
The argument that most of us hold today is that we should
not remove the estate tax for the wealthiest Americans, based
upon this notion that, by proffering some relief to the small
family farmer, who has a legitimate argument here today, that
we should cut taxes for Paris Hilton.
Chairman REICHERT. Thank you, Mr. Neal. Mr. Tiberi, you are
recognized.
Mr. TIBERI. Thank you, Mr. Chairman. Great testimony. Wow.
Mr. Neal, I love you, because you----
Mr. NEAL. I will be able to put that on my campaign
brochure.
[Laughter.]
Mr. TIBERI [continuing]. Well, you might not want to. And
the reason why is because he is trying to come to yes, in terms
of trying to fix the problem, except for the end of your
statement, with respect to tax cuts, in all due respect, from
my perspective, because we can, in this place, not pay for a
trillion-dollar spending bill, but then we have to pay for tax
cuts.
My dad--you love it when I talk about my dad, don't you? My
dad, when I was 16 years old, first job at McDonald's, said,
``We have a crazy tax system.'' Sixth-grade education,
immigrant to America. ``You get taxed when you earn it, you get
taxed when you save it, which is crazy''--this is my immigrant
father--``because it discourages you from saving, and then you
get taxed when you die, if you happen to save it, and try to
invest it, and try to get a nest egg for your family.''
Mr. NEAL. Would----
Mr. TIBERI. The debate that we have----
Mr. NEAL [continuing]. Would the gentleman yield?
Mr. TIBERI [continuing]. at the end of my statement, I
would be happy to. But the debate that we just heard is
fabulous, because it is like a debate that I have with my
friends who run conservative or liberal think tanks. You have
got reality, and you have got theory.
And what I loved about the three of your testimonies,' who
are living in the real world today, is that you are dealing
with this today. It is not theory. And you are not living
Warren Buffett's life. You are not living Bill Gates's life.
You are living a life, and your statement about your father was
awesome, awesome. Because what is so great about America is
that my mom and dad taught me that with hard work and a little
luck and a little bit of elbow grease, you can actually
accomplish something in America.
The Tax Code often times makes really weird--or makes
people make weird choices, and it does create winners and
losers. But the reality is--I have talked to people in Central
Ohio--because of this Tax Code, they spend so much time trying
to think--and money.
I had a guy tell me, second-generation trying to become a
third-generation family-owned car dealership, $50 million in
inventory on his lot. He doesn't have a private jet; he doesn't
have Warren Buffett's issues. He is trying to run a business,
trying to hire more employees, trying to pass a business on to
his son, and he is spending more time and money--that he could
otherwise use to hire more people--trying to make sure the
business doesn't have to be sold if he dies, or when he dies,
which is what you all said.
So, I appreciate the fact that we are trying to figure out
the family farm. But with all due respect to the two of you, it
is more than the family farm. It is that third-generation
business.
I talked to a business guy who sold his business to his
employees, which I think is great, by the way--ESOP, great in
Ohio, great in Minnesota, you support it. But one of the
reasons why he did it was because of the estate tax law. But
this is before we passed the $5 million exemption. And his son
is still involved in the business, and so is his daughter, but
they are no longer the owners. They are part of the ownership
team. But that was a decision made, in part, because of our tax
law.
So, I appreciate the fact that you three came here and
testified today, and really, really applaud you. This is hard.
And this place--it is hard to get things done. But you
represent why I believe Mr. Brady's legislation is the right
thing to do.
Ms. Madonia, can you just go into one other issue, or
expand on it? In terms of the subject of the death tax, and the
exemptions that you talked about, can you go into that a little
bit further?
Ms. MADONIA. Yes. We spent a lot of time in our family
talking about the estate tax, and we have got this generation
of kids. There are eight--my dad has eight grandchildren, and
several of them are in school or have graduated from school
with business degrees with some hopes, I hope, of coming to
work for us. But this is an issue that we have talked about
around our family tables for years, trying to--where my dad has
been trying to figure out the best way for him to continue to
grow the company and still preserve it for us.
We watched him our whole lives, we watched my dad work, you
know, 10 to 12 hours a day, literally. He would--when he first
bought the business, he would make the deliveries, and he would
work the counter. At 5:00 he would go into his office and do
receivables and payables. He did all of it. And we watched him
struggle through all that. And to watch him try and figure out
how he can pass it on to us, and let us make our mark on it
without having to dismantle part of it is, really, just
heartbreaking.
Mr. TIBERI. Thank you.
Chairman REICHERT. Thank you, Mr. Tiberi. Ms. Sanchez, you
get to follow Mr. Tiberi.
Ms. SANCHEZ. Thank you, Mr. Chairman, and thank you to all
of our witnesses for joining us here today.
The estate tax was originally instituted to ensure that the
very wealthiest families, those who have benefitted from the
greatness of this country, and the opportunities available in
the economy, could contribute back to that system, so that
others would also have those opportunities and chances to
succeed. And, over time, Congress has whittled away much of the
fairness that was in that system. So much so that, now, 99.85
percent of estates--99.85 percent of estates--are now exempt
from paying any estate tax, whatsoever.
If the existing exemptions and special provisions for
family farms and true small businesses aren't enough right now,
then let's specifically look at that. Because I am willing to
work on that. I heard your testimony; I very much sympathize
with your testimony. I understand the desire to keep things
running in a family business. I get that, I get the hardships
that you guys encounter. But let's not throw the entire baby
out with the bath water and say we are going to eliminate the
estate tax, all together.
This nation was founded on the principles that if you work
hard and you put your sweat equity into something, everybody
has an opportunity to earn their wealth, their status, and
their privilege. We don't believe in an aristocracy, or that it
is a good societal thing for dynasties to hoard their wealth
and leave the rest to fight over the crumbs. That is just not
how this country was founded.
But we have a paradox here in this country, where we think
you should work hard to get where you are because work, by its
very nature, and being productive, is very good. But, by the
same token, everybody wants to make enough money to where they
can retire and not have to work. And they want to preserve
increasingly larger and larger chunks of their wealth. And that
is why I am a little bit baffled why this Subcommittee is
focusing on our time on how we can be doing more, quite
frankly, for that last .15 percent of Americans.
But, you know, maybe I shouldn't be that surprised. After
all, we have seen proposals in the federal budget that gut
anti-poverty programs affecting the most vulnerable in our
society, seniors, children, and people with disabilities.
And there has been a long debate--we have had several
debates in the preceding two congresses--over means testing
eligibility for a variety of programs that help poor and low-
income families. We all agree that our federal dollars are
valuable, they are scarce. And means testing can be a tool in
helping to make sure that federal dollars are being spent in
the most efficient way, and targeted to the populations that
are truly deserving and most in need.
But one of the more recent Republican priorities has been a
drug test as a precursor to some of these means-tested
programs. Drug testing is an irrelevant requirement with
respect to whether or not a person is poor enough to qualify
for help in feeding her family, and yet they want to add those
additional burdens on to folks that need help the most. And
that is done under the guise of protecting the integrity of
those programs, as a way to weed out those who are truly
deserving from that benefit, and those who aren't. And, again,
that is the issue of drug testing.
I find it interesting that some of those same rules don't
apply to the scarce federal dollars that are being talked about
today to be used for additional tax cuts, again, for people who
are not just scraping to get by. And one current example is--
you know, I am a working mom--a single mother who works to make
ends meet. Why is it that she should be drug tested--which is
an unrelated requirement--to receive assistance, food
assistance, to make sure that her family has enough to eat, and
people who are lucky enough to inherit millions of dollars are
literally required to do nothing to get the federal tax benefit
with their inheritance?
So, my first question is for Professor Madoff. You are an
expert--I am sorry. You are an expert on estate tax law, and
you write the legal practice guides that most estate planners
use in order to do estate planning. What work requirements are
there to inherit up to $10 million tax-free?
Ms. MADOFF. There are no requirements to get that benefit
under the law. We have a preference in our tax system for
inherited wealth over wealth earned by wages, so that somebody
who inherits 10 million pays no inheritance taxes, they pay no
income taxes. They pay no payroll taxes.
And, moreover, they don't even have to tell the Federal
Government that they have received $10 million. The government
seems not to be interested in those flows of wealth, even if
that were to come from a distant relative, you know, money
lands on your lap--lucky you, you get it. It is the only income
that we don't subject to tax. It is, you know, very--we have a
very broad definition of income, and it is very odd that we
just give inherited wealth a free pass. And if we repeal the
estate tax, then it is completely free--it makes no sense at
all.
Ms. SANCHEZ. Professor Madoff, is there any really good--if
I could just ask this question, and I will take the answer in
writing--is there really any good policy reason for a bias that
is in favor of inherited wealth, versus the wealth that an
individual accumulates through their own hard work and sweat
and tears?
Ms. MADOFF. I don't think so.
Ms. SANCHEZ. Thank you. I yield----
[The prepared statement of Ms. Madoff follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman REICHERT. Well, that is quick and short, thank
you.
Mr. Paulsen, you are recognized.
Mr. PAULSEN. Thank you, Mr. Chairman. Boy, some really
great testimony. I just really appreciate hearing your
perspective, your story, your real-world experience of what you
are having to live with, and the successes you have built.
You know, you hear a lot of statistics about how the estate
tax might only affect large companies or businesses, and maybe
just a few wealthy individuals. But I can certainly tell you
that is not the case of the folks I have talked to, some family
businesses in Minnesota similar to what you have expressed
today. I have spoken to Minnesota farmers; I spoke to Minnesota
family business owners who have had their family livelihoods
threatened with the death tax right on the horizon.
I remember I met with an individual just two weeks ago, and
he has got millions of dollars locked up that he would love to
invest that capital to hiring more people, jobs, et cetera,
expansion, but he has got to work with the Tax Code, he has got
to plan for the future, all these accounts, all these lawyers,
and then plan for all these contingency plans, and it is just
sitting on the sidelines.
And, you know, there is one company, Ms. Madonia, it is a
company that is just like yours. And it is Johnstone Supply. It
is an HVAC company in Minnesota, equipment wholesaler in
Bloomington. It is a prime example of how detrimental this tax
can be for family business. And, unlike a lot of large
corporations, it is these small businesses that have a high
level of assets, but a very low level of liquidity. Right?
Farming is the exact same situation. And Johnstone, for
example, they own a few buildings, they carry that high level
of inventory, but it has relatively little working capital.
But when the family started looking at transferring
ownership to the next generation, they realized that they were
going to have to pay--they were having huge liquidity problems
when it came to paying these estate taxes. And they found that
the only way that they were going to be able to afford the
taxes was to sell off a portion of the business, or to purchase
a substantial life insurance policy. And that, because of the
uncertainty surrounding the estate tax--the company started
about 30 years ago--they never knew how much life insurance was
needed in order to help cover the cost of the tax.
So, when it became clear how big the burden was actually
going to be, the cost of insurance at the age of the family
members was substantial, it was huge. And, due to the
circumstances, then, the next generation of the family was
forced to purchase this Minnesota company, which, in turn, has
caused them to become highly leveraged, put the company at
risk, and they actually consider themselves very lucky to have
found a bank that was willing to actually do the deal. But
because his family still owns some companies in some other
states, they have been forced to spend about 20 percent of
their net income on life insurance to fund their future estate
obligations.
Now, this is money that could otherwise be reinvested in
the company, reinvested in the business in their community, and
put towards growing the company. But the money is locked up.
And this isn't a family that is trying to evade taxes. They are
not trying to escape taxes. They simply want to keep the
business afloat, and in the family for other generations. And
so, the Tax Code is literally forcing them, essentially, to
consider breaking up the family business. And that is jobs
lost. That is layoffs, and that is the wrong direction.
So, Ms. Madonia, I just want to follow up a little bit. It
brings me to the question of how--what options do family
businesses like yours or like Johnstone Supply really have when
it comes to the estate tax today? And what does repeal mean for
expanding operations, for increasing sales, for creating jobs?
Would it make your business stronger?
Ms. MADONIA. Yes, absolutely. And, for the record,
Johnstone Supply is also a HARDI member, so we know that--I
know those folks well.
Yes, the statistic about the--only affecting a small
fraction of estates, I think in large part that is probably
because people spend a lot of money trying to figure out how to
preserve their company without having to pay that tax. So, if
you--I don't have a number. I wish I had a number. I wish there
was some way to kind of capture that statistic on how much
money is spent every year on hiring accountants and lawyers to
try and figure out how you could--how you can, you know, pass
your company on.
In our case, I know that we sit on a lot of cash, and we do
that purposefully, because my dad is in his seventies. And,
while it wouldn't be enough cash to pay the estate tax if we
got hit with it, it would help us a little bit. And that money
could very easily be used to hire more people, to start a new
branch, to get into new equipment lines, or add another vendor
to our list of preferred vendors. It could be used for a lot of
things. Buy more trucks. And it is not being used for that,
because it is sort of earmarked as ``just in case'' money.
Mr. PAULSEN. And what really comes out in your testimony? I
think of your father sitting around the table, planning for the
future. It is not about some aristocracy, or passing this on
for family wealth. It is about keeping a company afloat, and
living that American Dream for other generations and for
other--having many more jobs, many more employees. That is a
big part of our economy, that is the engine of our economy, is
many small businesses, just like yours.
Ms. MADONIA. Yes.
Mr. PAULSEN. I yield back, Mr. Chairman.
Chairman REICHERT. Thank you. Mr. Kelly, you are
recognized.
Mr. KELLY. Thank you, Mr. Chairman. I thank you all for
testifying. I never sat in those seats, but I have sat in
something similar to yours. First of all, Ms. Madonia, we are
not talking about passing on your estate to Madonna, the
singer. We are talking about Karen Madonia, who is in a
business.
And, Mr. McKnight and Mr. Whitt, in addition to what you
are doing on an everyday basis--I am an automobile dealer--you
are also tax collectors, aren't you? You guys, when you pay
people wages, whether it is the mechanic that worked on your
car, or somebody that works in your fields, or somebody that
works on your farm equipment, or somebody that does whatever
they do for it, don't you pay wage taxes? Yes. So, we collect
taxes. I just wish it was only double taxation. I could live
with being taxed twice. I can't live with being taxed to death,
and then even--you can't even die without paying taxes, because
of a government that can't stop spending your money.
And so, when we talk about this great loss of revenue, what
we are talking about is leaving the money in the pockets of the
people who earned it, not the people who burned it. And I am
just--I am fascinated, as you go through this--how--look at 208
years your family has been in this business. The contributions
to your community over the years? I don't think you could put
it in dollars and cents, could you?
Just in some of the taxes, just talk about some of the
taxes you pay.
Mr. WHITT. Well, of course, obviously, our business is
small, we don't employ a whole lot, but we--give you an
example--we sell over a quarter million dollars of pork
products a year that we pay sales tax on. We pay sales tax for
all the products that we sell out of our retail locations. We
pay our employees' payroll taxes. So, you know, it is not like
we are sitting back, raking in the money, and never paying any
taxes out.
And it would be fascinating to go back and see the benefit
that our family businesses had on Murfreesboro, the town of
Murfreesboro, over the last 208 years.
Mr. KELLY. But just in--you don't really consider
yourselves one of the privileged one percent, do you?
[Laughter.]
Mr. WHITT. Well----
Mr. KELLY. I mean I see--here every day I see divide,
divide, divide, divide. It is always, ``the wealthy, the
wealthy, the wealthy.'' And I watch what you are doing. I got
to tell you, this is incredible, the amount of income, the
amount that you put back into your communities. I mean, what
you have done, over 208 yards--years, the Batey Farms have
employed people, have paid federal withholding tax, have
collected taxes, wage taxes that--by the way, Social Security,
Medicare--all of those things are collected by you and then
sent to the government for their distribution.
Mr. McKnight, same thing. You are seventh generation.
Mr. McKNIGHT. Yes. And just to tell you a little about our
story, about the time I got out of college, certainly not
familiar with the estate tax, but my grandfather and great-
uncle were the principals in our family business. My father and
aunt were--the uncle had no children, so basically it was like
they had two fathers. About the time I got out of school, my
grandfather passed away, followed by my great-uncle's dad,
followed by my grandmother's death a little later. My dad
contracted Parkinson's during this time, and we lost him in
2004.
So, basically, the first 24 years of my working career
there was never a day I didn't have to deal with the estate
tax, planning it. It was--basically, I was a government
employee with no benefits, you know? And during those 24 years
I watched two-and-a-half generations of hard work, sweat, and
savings evaporate. And that wasn't enough. We had to go in and
liquidate twice. And in a cattle operation, those liquidations
are very risky. We were able to get through it, but we had good
weather, and we made it through that. But even at that point,
there was still a liquidity problem, and that is when we had
the layoffs.
And, unfortunately, I think a lot of these layoffs are the
forgotten casualty of this punitive tax. And the biggest
expense, though--again, I got out of school. I didn't come home
to grow smaller. We came home to get bigger. We wanted to be
part of the solution, not the problem. The loss of
opportunities in those 24 years, I can't enumerate that. And
the last six years is the first time I have had the freedom to
go to work and just concentrate on our family business.
Again, I don't know what the positive aspects of this tax
are.
Mr. KELLY. Well, it is becoming very unpatriotic to die.
[Laughter.]
Mr. KELLY. Because at that point you go off the tax rolls.
We found a way to even get to you after you are laid to rest.
Ms. Madonia, I mean, tell me. I mean, your story is the
story of so many people across America. And I am serious about
this. We keep talking about the super-wealthy. Mr. Paulsen hit
on it. You talk about assets that aren't liquid; I am an
automobile dealer, too. So I get a little bit concerned about
that. We have spent more time and more money trying to figure
out how to maintain a family business that my dad started in
1953 after being a parts picker. This guy did not inherit great
wealth. He worked to accumulate something, he passed it on. I
had to buy it from him, it wasn't left to me in his will, by
the way, so I have been paying taxes my whole life.
But--well, I know I am getting gaveled, but listen. Thank
you for being here today. God bless you. Don't give up the
fight, because we are not, either.
Chairman REICHERT. Thank you, Mr. Kelly.
Mr. Thompson, you are recognized.
Mr. THOMPSON. Thank you, Mr. Chairman. Thank you all very,
very much for being here. And I really would like to dig in and
try and solve this problem. I think we have a responsibility,
and not to preserve millions of dollars in tax cuts for
billionaires and the top one percent, or however it is being
characterized here, but we have a responsibility to make sure
the estate tax works in a way that protects the people who
create jobs and the family farmers, and even the family
business owners.
I have carried legislation in this Congress--matter of
fact, the first bill I introduced when I was elected to
Congress in 1998 was a bill to address this issue. And I am
getting ready to reintroduce it again, the Family Farm
Preservation and Conservation Tax Act, that would exempt family
farms from paying estate tax if the farm continues in the
family, and continues to be farmed.
You know, if you sell it or rent it out and go live on the
beach in Hawaii, then, you know, we ought to tax you. But we do
need to figure out a way to preserve valuable farm land. We are
losing it by way too much every day. We are losing ag land
while we are sitting here today.
And I was particularly impressed, Mr. Whitt, with your
testimony. You brought up a lot of the issues that I bring up
when I talk about my bill: the cost associated with protecting
your family farm from being lost; the loss of ag land to
development; the idea that young farmers--we are losing young
farmers. And if we don't do something about estate tax and how
it impacts family farms, we are going to lose more. And I don't
think we want to do that. So I am very encouraged by the
committee having this hearing.
I hope we can get away from the rhetoric. It is not death
tax, it is estate tax. And I think that was a very clever
political strategy, but I think it has backfired, and it has
hurt us in trying to resolve this very, very real problem.
Ms. Madoff, I have got some questions for you. You are a
tax attorney, correct?
Ms. MADOFF. Mm-hmm.
Mr. THOMPSON. Is there anything in the Tax Code that is--
refers to death tax? Is there a ``death tax''?
Ms. MADOFF. No, there isn't.
Mr. THOMPSON. Does anybody pay taxes after they die?
Ms. MADOFF. No.
Mr. THOMPSON. Okay. So you don't get called for jury duty.
You are dead, you are dead.
Ms. MADOFF. As they say in the Country-Western song, you
know, ``They don't have luggage racks on hearses.''
Mr. THOMPSON. Yes, exactly. I think it is important to
establish that, and delve into the policy, rather than the
politics.
Do you think that, short of repeal, that there is a way
that we can target a solution to deal with this issue?
Ms. MADOFF. Absolutely. And the legislation is already
there on our books. It has been--it is not currently active,
but Sections [sic] 2057 could address all businesses, and
Section 2032a could address farmers.
And I think it is really important for this body to be
aware that every single one of these witnesses would be better
off with a targeted exemption than with repeal of the estate
tax, and here is why.
Mr. THOMPSON. Well----
Ms. MADOFF. It--oh, sorry.
Mr. THOMPSON [continuing]. We get it.
Ms. MADOFF. Okay, but----
Mr. THOMPSON. I would like to give you a copy of my
legislation I am going to be introducing in the next week or
so, and I would like to get your feedback on that.
Mr. Whitt and Mr. McKnight, I have a question for you, for
both of you. If total repeal of the estate tax isn't
politically feasible, are you supportive of finding a way to
protect the capital assets of family farmers and ranchers so
their family farms can continue? Are you willing to forgo those
protections until, if ever, the estate tax is fully eliminated?
Mr. WHITT. That is a loaded question----
Mr. THOMPSON. It was pretty straightforward.
Mr. WHITT [continuing]. To be honest with you. And, you
know, I really believe that targeted legislation, it sounds
good on the forefront, and maybe we can help out, but there are
a lot of rules that come along with that.
Mr. THOMPSON. This would be pretty straightforward. It
would say that you--if your father-in-law passes away and
leaves you and your wife the farm, as long as you continue to
farm it, you would be exempt from paying any taxes, any estate
taxes.
Mr. WHITT. If it is that simple.
Mr. THOMPSON. Yes. So you would support something like
that?
Mr. McKnight, would you?
Mr. McKNIGHT. Again, something to look at. I think the
devil is in the details. How do you treat a rancher maybe that
has gone out and invested in another business? Or maybe they
are expanding through their----
Mr. THOMPSON. I am just talking about the family farms.
Family farms.
Mr. McKNIGHT [continuing]. Again, if this were just--again,
I think it is very complicated. The devil would be in the
details----
Mr. THOMPSON. Pretty straightforward.
Mr. McKNIGHT. Okay.
Mr. THOMPSON. Let me----
Mr. McKNIGHT. If a guy has got multiple businesses--you are
saying he would be exempt from the tax, or he would have to
pay----
Mr. THOMPSON [continuing]. It would be your family farm
that would be exempt from the tax. If you own a family farm,
and you have a bucket of gold, you still pay the estate tax on
the bucket of gold.
Mr. McKNIGHT [continuing]. Right.
Mr. THOMPSON. But the family farm would be protected, if
you keep farming.
Mr. McKNIGHT. I think the devil would be in the details,
how that was written.
Mr. THOMPSON. Let me ask you. On--the American Farm Bureau
policy manual states on page 152, ``If the''----
Chairman REICHERT. The gentleman's time is expired.
Mr. THOMPSON [continuing]. Mr. Chairman, I would like to
submit for the record the policy of the American Farm Bureau,
and the policy of the NCBA, as it relates to this issue.
Chairman REICHERT. Without objection.
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Mr. THOMPSON. Okay, thank you.
Chairman REICHERT. Mr. Renacci, you are recognized.
Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the
witnesses for being here. It is interesting, because, as I sat
here and listened, there were times my blood pressure went up
and times my blood pressure came down. I am a--was a small
business owner, so I appreciate what you all have done. I also
am a CPA, and I also have done estate tax planning. So I have
seen it from all avenues, and I understand the issues that you
are facing.
And this, really, this hearing is about two things, in my
opinion. It is about the orderly transfer of business interests
upon death, and it is also about double taxation. I think those
are the keys we should be zeroing in on.
It is interesting, some of the issues that were brought up.
You know, there was talk that inheritance isn't taxed. I heard
one of the witnesses say that. Those are the exemptions of the
inheritance. That is part of the exemption of the amount. But,
you know, that is the rhetoric that we continue to hear,
because there is also income that is not taxed, and that is
because of the exemptions that you have on income tax. So there
are pieces of taxable income that are not taxed. So, I just use
that as we got to watch what we say when we say inheritance
isn't taxed, because there is income tax. There is income that
is not taxed. There is all kind of ways we can talk about this
and look at this.
But--and this hearing really isn't about Soros, Gates,
Buffett, or Hilton, because, quite frankly, Soros, Gates,
Buffett, and Hilton probably will not pay very much estate tax,
because they have probably done enough things, whether it is
through dynasty trusts, foundations, family partnerships, all
those other things that they were able to do because of their
liquid assets, they are able to, in most cases, get around much
of the estate tax that you all have to pay.
The question here is how do we make sure, especially when
it comes to small businesses and family businesses, how do we
make sure that there isn't a burden placed on you upon the--
and, again, when we talk about words, I mean, we say that there
is no death tax. No, there is--upon death there is an estate,
and upon the estate there is a tax. So the question is how you
want to talk about it.
We can get rid of all this rhetoric, and just really get
down to the basics. How do we make sure that, in the long run,
a business can survive and sustain itself and move forward? And
I think if we do that--and I am glad to hear many of my
colleagues on the other side are talking about ways of doing
that. How can we get that accomplished? Because it is too many
times where I have seen, back in my district, back in Ohio,
where people with a small farm or with a small business, upon
the death of someone, and the estate, and the estate tax, are
not able to continue the business, because the business has to
go up for sale because of the fixed assets, because of the
buildings, because of the assets that are there, because of the
farm land being valued at a certain level, all of those things.
So, I think it is important that we look at this issue.
But, at the same time, I also believe there is a double
taxation, because I have seen too many times where businesses
have come up, their business sells, they pay their tax, that
individual now has liquid assets, and then, upon his death,
those liquid assets go into an estate, and then those estate
assets are then taxed at almost a 50 percent rate, and they are
double-taxed.
Now, the question is, should the Federal Government be able
to take those dollars? And should the Federal Government be
able to be part of that double taxation?
Or, the better question is, should value continue to be
passed on from family to family to family at a--I mean the--
again, now I will go back to Soros, Gates, Buffett, and Hilton.
I guarantee you those individuals, if you know----
Mr. NEAL. Will the gentleman yield?
Mr. RENACCI [continuing]. I will, but not right now. But if
you take Paris Hilton, the daughter, quite frankly, she is
getting a lot of money somehow from her family. So----
Mr. NEAL. Thank you very much.
Mr. RENACCI [continuing]. But I will yield.
[Laughter.]
Mr. RENACCI. But, anyway, so, again, this continues to be a
discussion about how we fix the problem, and how we take care
to fix that.
And, again, I could ask every one of the three of you--I
mean I am sure you have all purchased fixed assets in the farm.
I was the CPA for three farms. I understand the business. You
probably have--I mean what is the cost of--what is--give me a
cost of one of your pieces of equipment in your farm. A big
one, a big one. A big----
Mr. WHITT. The last combine price, $340,000.
Mr. RENACCI [continuing]. Absolutely. So you got 340,000
tied up in this. You got this large amount tied up in your
land. All the sudden there is a death, then there is an estate,
and there is taxation. How do you come up with those dollars?
How are you planning on coming up with those dollars?
Mr. WHITT. By growing the business. How does a small farm
continue to be a small farm, with the increased values that we
are having to pay for the equipment, the expenses that we incur
on that farm? The only choice we have is to grow, to have more
growth sales to compensate. We don't really make much money off
of the products that we sell. The margins are very low. So how
do we increase that? We sell more. We have to grow more to be
able to purchase these things, just to run the business. It
takes a combine--I don't think any of us want to go back out to
the field and start hand-picking our crops. We will become very
inefficient at that point.
Mr. RENACCI. Thank you. My time is--I yield back.
Chairman REICHERT. The gentleman's time is expired. Mr.
Brady is recognized.
Mr. BRADY. Thank you, Chairman Reichert, for permitting me
to participate in today's important hearing. I want to thank
the witnesses, as well. Very helpful, including my fellow
Texan, Bobby McKnight. Like many of you, I have been fighting
to permanently repeal the death tax since my constituents first
sent me here to Congress.
And I would like to echo a very important point made this
morning. This tax is not about reducing income inequality. The
super-rich have a legion of lawyers and all the resources in
the world. It is not the super-rich that pay this tax; it is
the people who are at the table today who pay this tax. This is
the number-one reason--death tax is the number-one reason
family-owned farms and businesses aren't passed down to the
next generation. The number-one barrier. It is the farmer, the
rancher, the courageous entrepreneur, family-owned business,
whose assets are tied up in buildings and machines and property
tax that pay the death tax. It is their spouse and children
that have to sell the business, or parts of it, just to pay
Uncle Sam.
One Texas rancher I have known for a long time has paid the
death tax three times. Her grandfather started their Texas
cattle ranch in 1970, just a year after this tax was created.
In 2011, her husband passed away suddenly in a tractor
accident. The price of hay was outrageous because of the
drought. Diesel costs were way up. She had no idea how she was
going to continue the ranch. And the IRS swooped in, and forced
her to sell huge chunks of cattle stock, just to pay the death
tax, all the while she and her children are mourning the loss
of their husband and father. Try telling that family they are
like Paris Hilton, exactly.
A former staffer, a young woman staffer of mine returned to
her family ranch in Texas recently after her aunt passed away
to help sell her estate. This was a ranch that her great-great
grandfather had settled in the 1800s. She and her brother were
able to keep that ranch. Guess how? They merely had to sell
two-thirds of the ranch to keep it. So tell this young woman
she is exactly like the robber barons of the Teddy Roosevelt-
years.
The death tax is an immoral tax. And it is an attack on the
American Dream. It disproportionately hurts small businesses
and start-ups. They have already paid, as Mr. Renacci and
others have pointed out, very high rates on it to begin with,
and Uncle Sam swoops in and takes 40 percent of the nest egg
they have built a lifetime trying to put together.
And what is worse is that this tax is especially
destructive to women and minority-owned businesses, the
fastest-growing sector of our economy today. Harry Alfred, the
president and CEO of the National Black Chamber of Commerce,
goes as far as calling this tax, in his words, ``a black tax,''
because of its destructive effect on black-owned small
businesses.
A study by two Boston College professors, Professor Madoff,
several years ago estimated that between 2001 and 2055, the
first half of this century, the death tax will wipe out between
11 and 15 percent of all African American wealth, 11 and 15
percent of all African American wealth wiped out by this tax.
This one tax alone these Boston College experts said would cost
African American households between $192 billion and $257
billion. This is not a decoy for the wealthy. These are real
people.
And imagine what that money could do if it was invested in
education and businesses and jobs.
So, as Members of Congress, I think we are tasked with
making our great country better, with ensuring that we leave
our children a better nation than the one we received. The
death tax, I think, Mr. Chairman, betrays that oath. And so I
urge my colleagues to work with me in eradicating this immoral
tax once and for all.
I know you have been given some bits and pieces. ``What if
we do this to satisfy you?'' And, ``What if we just sort of buy
you out of this thing?'' But the point is that Washington will
pick winners and losers among people who have built wealth, and
that is wrong.
And, by the way, after the agreement was reached on the
current estate tax levels, the President immediately turned
around and began lowering those exemptions and raising those
rates. And so, whatever you are promised today I guarantee you
won't be there tomorrow.
So, Mr. Chairman, thank you very much for having me here
today.
Chairman REICHERT. Thank you, Mr. Brady, and thank you for
your hard work on this issue, and thank you for the work you
put in to your piece of legislation. Thanks for being patient
and staying with us today, and offering your comments.
And just before we end the hearing----
Mr. NEAL. Give me one----
Chairman REICHERT [continuing]. Oh, I am sorry. We have one
more for Mr. Neal.
Mr. NEAL [continuing]. Thank you. Just--and thank you, Mr.
Chairman, very helpful----
Chairman REICHERT. Quick question from Mr. Neal.
Mr. NEAL [continuing]. Yes. Ms. Madoff, just to follow up
on what Mr. Thompson said, is there a good way to exempt family
farms and small businesses from the estate tax? And would you
develop and offer a better approach? And why?
Ms. MADOFF. Absolutely. And it would be much better for all
of these witnesses. So let me explain what it is.
Section 2057 was a short-lived provision that provides--
that was designed to provide benefits, but could be made into a
complete exemption for family businesses and farms. Section
2032A would be for land. And the reason that this would be more
valuable for all of these witnesses is because this body only
controls the federal tax system. But, increasingly, states are
turning to their own state estate tax systems, and they model
them on the federal definition of the gross estate.
And so, these organizations, if you repeal the federal
estate tax, they would continue to be vulnerable to possibly
being taxed under the state estate tax systems, which are in
more than half the states. But if you provide an exemption for
the definition, an exclusion from the gross estate, they would
be protected from their states. And so it is very important. An
exemption would be much more valuable for every single one of
these witnesses. And I agree that they should all be protected.
And they can easily be protected by Section 2057.
And you have to remember this only applies to eight percent
of the assets. Studies--numbers just came out. Eight percent of
the assets are small business assets, ninety-two percent are
other assets. So the numbers--we should not throw out the whole
system because of eight percent. This eight percent is an
important part of our economy, and should be addressed, and can
be, easily and fairly.
Chairman REICHERT. Thank you for your----
Mr. NEAL. Thank you, Mr. Chairman.
Chairman REICHERT [continuing]. Thank you, Mr. Neal. Thank
you, Ms. Madoff.
Mr. Reed, you are recognized.
Mr. REED. Thank you, Mr. Chairman. And, as with Mr.
Renacci, my blood pressure has gone up and down during the
testimony here today.
But I will start with this. I am getting sick and tired of
folks down here blasting the American charitable spirit. You
know, as I am sitting, listening to the testimony, I just
Googled Warren Buffet. Do you know how much money he has
estimated to be giving away? $37.4 billion. See?
And so, Ms. Madoff, I appreciate your Utopic commitment to
the government bureaucracy of D.C. to be able to magically
acquire all this money that people have earned over a lifetime,
and will go to Washington, D.C. to then have D.C. ferret out
where it is going to go amongst the masses of the 300 million
Americans that we call our fellow citizens.
I believe Mr. Whitt and his family, they worked hard. Who
owns your property?
Mr. WHITT. My father-in-law.
Mr. REED. Your father-in-law. You, right? Not the
government. When you are done with your use of that land, that
is a fundamental principle that we hold in America. You own
that property. You earned that property.
And if you choose to do what I think the American spirit
and our fellow Americans do on a regular basis, it is amazing
to me how much our fellow citizens are charitable. You look at
Bill Gates. Look at Andrew Carnegie, one of the robber barons
that was potentially referenced to previously in some of the
testimony. What did Carnegie do? Carnegie invested tremendous
amounts of money into our society, into our American society,
and did some very positive things.
Now, I am not going to defend every single American who may
have ulterior motives and has an evil heart. But I will tell
you the vast majority of Americans I know, they are good
people. They are charitable people. And it frustrates me that
we have a tax system that is essentially going to say, ``When
you die, yes, we taxed your entire lifetime, but you are going
to pay one more.'' How is that fair?
The question you keep raising, Ms. Madoff, in your
testimony, or your written--is a question of fairness. I would
throw that back at you and say, ``How is it fair that
Washington, D.C. takes your property and makes you pay a tax on
it at your death?'' You have earned that property.
So, as we have this conversation----
Mr. NEAL. Mr.----
Mr. REED [continuing]. I just----
Mr. NEAL [continuing]. Will the gentleman yield?
Mr. REED [continuing]. Sure, I will yield a minute.
Mr. NEAL. If you--to throw it back at her, would you let
her answer?
Mr. REED. Well, I have listened to hours, and read her
testimony. And I understand where she is going to come from on
her testimony. And, Ms. Madoff, it is no personal disrespect to
you, but you represent a philosophy that is very frustrating to
me, a philosophy that your testimony speaks loud and clear to,
ma'am. And it is a philosophy that I came to Washington in 2010
to fight, is that I trust the individuals more to do with their
property what is right.
And when they work their entire lifetime, when I talk to my
family farmers back in Western New York, and they are there on
the eighth, seventh, sixth generation, and they are telling me,
``You know what? When my father dies, I am going to have to
carve up my farm to pay the tax bill''--because land isn't
cash. That $340,000 combine that you paid--that is not cash.
And if you have a bill that goes to the government, they want
cash. Uncle Sam doesn't take a combine and say, ``Call it
even.'' He wants cash. And so that is the problem.
And then, you know what also happens? I have seen it in the
eyes of my constituents. I have seen it in their eyes, when
they say, ``You know what? I have to carve up my property in
order to pay for this tax bill.'' And you know what happens?
Farming. Do you do farming because you want to be a multi-
millionaire, Mr. Whitt? You are going to be a robber baron of
the 21st century of making that big mega-farm across America?
Why do you do farming?
Mr. WHITT. Because it is an action of servitude to my
fellow man.
Mr. REED. Amen. It is a way of life. It is a way of life.
And when I see the tears in the eyes of my constituents who
say, ``All I want to do is just go out and work my land''--
``All I want to do is build my inventories in my HVAC company
that''--I believe you have an HVAC company, right? That is all
they want to do.
But, no. What we are going to say is we in Washington know
what is best to do with that money that you have earned over
your lifetime. Send it to Washington, and then we will sprinkle
it among the masses. I would trust Ms. Madonia, I would trust
Mr. McKnight, and I would trust Mr. Whitt to take care of his
fellow man in his community, in his back yard, rather than have
this taxation system that you are talking about, Ms. Madoff.
Ms. MADOFF. I am sorry; I guess I didn't make my testimony
clear, because I agreed with you, that none of these people
should have to pay an estate tax for their family businesses,
so I entirely agree with you.
Mr. REED. But you are going to--reclaiming my time--you are
going to draw the line, and somebody is going to pay for it.
And even the people that are the robber barons, like the
Andrew Carnegies, just like Warren Buffett, $37.4 billion of
his money going to better our fellow American citizens. And
that is the American spirit that I love and I am committed to.
And with that, I yield back.
Chairman REICHERT. The gentleman's time is expired.
While I was the chairman of the Human Resources
Subcommittee prior to coming to the Tax Committee subcommittee,
this is almost more emotional and compassionate than the human
resources. I didn't think taxes were going to get this
exciting, but you can tell that there is--there are strong
feelings on both sides of the aisle.
I think that you also sensed, as witnesses today, that both
sides really understand the issue that you are dealing with,
the taxes, the decisions that you have to make, and I think
there was some agreement here that we need to do something.
Now, there is disagreement as to how and what, and I
noticed that, you know, as Mr. Thompson talked about his bill,
he asked--his piece of legislation--Mr. Whitt and Mr. McKnight
how they felt about it, but he didn't ask Ms. Madonia. And I
would imagine that her answer would be a little bit different,
since that bill only addresses family-owned farms. There are
other businesses out there that, frankly, as we have heard
today from Ms. Madonia, that are affected by the estate tax, or
death tax, however you want to refer to it.
So, I am going to come away with--this first experience as
the chairman of this Subcommittee--with a positive feeling that
most of us on the committee feel like we need to do something.
And we are going to continue to work on this. And, again, I
congratulate Mr. Brady on his bill.
And so, today, that concludes our hearing. And I must
advise that Members may submit written questions to the
witnesses. Those questions and the witnesses' answers will be
made a part of the record.
Again, I would like to thank all the witnesses for being
here today. Thank you for taking time out of your busy
schedules, away from your families and your businesses, and
thank you all for your testimony. The committee stands
adjourned.
[Whereupon, at 11:35 a.m., the Subcommittee was adjourned.]
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