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Archer Advises Estate Tax Repeal Advocates to Continue Fight Regardless of Outcome on Tax Reform

Thursday, April 25, 1996

OnLine

House Ways and Means Committee Chairman Bill Archer, R-Texas, said Wednesday the goal of small business advocates should be to repeal or curtail the estate tax, even if full-scale tax reform is not enacted.

Archer's comments came as tax reform hearings continued in the House Ways and Means Committee with the emphasis shifting to how repeal of the estate taxes and other reform proposals would impact small businesses.

The estate tax threatens family businesses with destruction upon the death of its founder, the chairman warned. If that happens, the government will have "taken away the assets" that the business would have used to create jobs and wealth, Archer warned.

Similarly, Rep. Mel Hancock, R-Mo, said that Americans must be educated as early in their lives as possible about the dangers of the estate tax.

"The biggest problem" confronting those opposing the tax is that allies in the fight only emerge when they discover latter in life that their assets will be heavily taxed upon death, Hancock said. If the tax is to be repealed, younger Americans must also be educated about the tax's dangers, so that a broader base of opponents can be developed.

After hearing several representatives from the National Federation of Independent Business, the National Association of Manufacturers and others express support for vastly simplifying the tax system, Rep. Charles Rangel, D-NY, questioned whether a less comprehensive approach would achieve the same results. "There's nothing that any of you have said that couldn't be done without pulling out the current system," as reform proponents advocate, Rangel said.

Other committee members at the hearing d on different issues relating to reform. Rep. John Christensen, R-Neb, noted that the difficulty businesses face classifying their workers as independent contractors or employees is burdensome and must be addressed. Christensen has introduced legislation to deal with this problem.

Hancock questioned whether the elimination of the mortgage interest deduction would be harmful to families, as long as they are able to re-invest the tax savings resulting from reform in other assets.

After World War Two, Japan encouraged its citizens to invest in business, while the U.S. encouraged its citizens to invest in housing, and Japan now seems stronger financially than does the U.S., Hancock said.

Rep. Rob Portman, R-Ohio, pointed out that any overhaul of the tax system must be revenue neutral and stressed that the benefits of spending cuts must not be ignored by legislators.

Also at the hearing, Rep. Sam Johnson, R-Texas, announced his intention to introduce a bill that would repeal the Constitution's 16th Amendment, which established the income tax. The Tax Freedom Bill "will reverse one of the most destructive amendments to the U.S. Constitution and deny Congress the ability to lay and collect taxes on income," Johnson told the committee.

Criticizing Johnson's proposal, Rep. Gerald Kleczka, D-Wis, said, if the amendment were repealed, the U.S. would have to rely completely on some form of consumption tax to fund the government. No other industrialized country in the world has such a tax system, he said.

The amendment's repeal would result in a tax system with no deductions for mortgage interest or other items, and such a consumption-based system would force businesses to act as revenue collectors, the Democrat added.

The tax reform hearings are scheduled to continue May 1, when the focus will be on state and local governments, and on tax-exempt organizations.