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HR 8 -- 06/08/2000

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Office of Management and Budget


June 8, 2000

H.R. 8 - Death Tax Elimination Act of 2000
(Dunn (R) Washington and 241 cosponsors)

The Administration strongly opposes H.R. 8, which would repeal the estate and gift taxes. Repeal of these taxes would be fiscally unwise, would reduce the overall fairness and progressivity of the tax system, and would harm charitable giving. The President would veto this legislation repealing the estate and gift taxes if it were presented to him.

The Administration believes that such a tax reduction would harm the important priorities of maintaining fiscal discipline, paying down the national debt, extending the solvency of Medicare and Social Security, and maintaining core government functions such as education and fighting crime. The Administration estimates that this legislation, when fully phased in, would cost close to $50 billion annually, far more than the stated costs of the bill, because most of the cost is delayed to beyond the first five years.

While the Administration supports appropriately targeted estate tax relief for small business and family farms, a tiny fraction of the tax relief provided under this measure accrues to these important sectors of the Nation's economy. Only the wealthiest two percent of all estates pay any estate tax at all. The estate tax promotes the integrity and fairness of the overall tax system by acting as a backstop to the income tax, ensuring that even income on which income tax is deferred or avoided is ultimately subject to at least some tax. In addition, recent studies suggest that repeal of the estate tax could reduce charitable gifts and bequests by close to $6 billion annually.

The Administration worked with the Congress in 1997 to lift the burden of the estate tax on the vast majority of small businesses and family farms. The Taxpayer Relief Act of 1997 raised the effective deduction for qualified family-owned business interests to $1.3 million ($2.6 million for a couple), which exempts almost all family farms and small businesses from the estate tax. Current law also allows small businesses and farms to exclude part of the value of real property used in their operations. Those few businesses and farms that are subject to this tax can pay it in installments over 14 years at below-market interest rates.

The Administration would be pleased to work with the Congress to continue to help relieve the estate tax burden on small businesses and family farms, and to make the estate tax simpler and fairer in a fiscally responsible way. The Administration believes the Democratic alternative, which would reduce rates, increase the unified credit, and close loopholes, offers fair relief in a fiscally responsible manner. In addition, the Administration would support relief targeted at the estate tax burden attributable to appreciation in long-held principal residences. The Administration would support these proposals as part of a balanced framework that pays down debt, strengthens Social Security and Medicare, provides tax relief to middle-income families, and funds critical initiatives.

Pay-As-You-Go Scoring

H.R. 8 would affect receipts; therefore, it is subject to the pay-as-you-go requirements of the Omnibus Budget Reconciliation Act of 1990. The Administration has not yet completed its estimates of the costs of the bill; however, based on estimates of revenue losses made by the Joint Committee on Taxation, the absence of any offsets could cause a sequester of Federal resources.

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