By James L. Martin

“Good afternoon. I am president of a national, non-partisan senior citizens’ advocacy group, the 60 Plus Association. Our role is to look at public policy from the perspective of how it would assist seniors to better enjoy their golden years, and be free of the burden of government and higher taxes. Thus, we approach senior issues in expanding freedom for seniors, with less government and less taxes.

I especially commend the Frontiers of Freedom Institute, Senator Malcolm Wallop and Executive Director George Landrith for sponsoring this important conference only global warming, because the current controversy will have a major effect on our millions of senior citizens.

Is the planet warming? And if so, does the warming justify ratification of a treaty or the implementation of its provisions by regulation, which will have a dramatic effect on our economic system and way of life? We need to think about this prospect carefully before our country takes a leap into the darkness.

We have an American tradition that people can take us at our word. If our country ratifies a treaty, we will mean to keep it. We will not fudge on it or violate it. So we must be extremely careful as we enter what could be an abyss.

We are the most powerful nation in the world. We have also shown the world how to advance economically. We have also produced efficiencies in the use of fuel. However, make no mistake about it, there are some facts we must face: we will be using fossil fuel in order to keep our economy going; we cannot rely on nuclear fuel as a substitute because political considerations have stopped the impetus toward that supply; and we, as a growing nation, will be increasing our energy supply.

The 60 Plus Association is an active member of what is called the Cooler Heads Coalition, a group that, by its name alone, dashes cold water on the global warming theoreticians. Our hope, and the one

overriding thought I hope you go away with today, is that cooler heads will prevail in this debate.

I would like to make three points on how the hysteria over global warming will be a disaster for our senior citizens.

Senior citizens will be the ones really burnt if this foolish global warming (Kyoto treaty) is implemented — burnt with higher energy costs for fuel in the winter and air conditioning in the summer, both of which are essential for their health.

The three points I want to mention are the (1) the unreliability or uncertainty of the data; (2) the overall negative effect on our economy thus impacting seniors; and (3) the human costs to seniors.

First, as we discover in our readings and the presentations today, it is very uncertain that there is global warming. Scientists do not agree if the planet is getting warmer, getting cooler or staying about the same.

In fact, there has been some discrepancy in the data on the temperature from surface measurements and from satellite. Why this discrepancy, we do not know. There may be many factors, but we do know it does not give us a clear picture. In fact, temperature measures from satellites for the period 1978 — 1997 show no temperature rise at all.

The senior scientist for climate studies at NASA’s Marshall Space Flight Center in Huntsville, Alabama, Dr. Roy Spencer, has aptly noted: “The popular perception of global warming as an environmental catastrophe cannot be supported with measurements or current climate change theory.” (Earth report 2000)

Seniors are very practical people. They have learned a lot about life through experience.

And they tend to be suspicious of unproven hypotheses, especially if it affects their lives and the great contributions they have made to the growth of this country.

We see much in the debate that has become “politicized.” The scientists who get attention are the ones who say there is global warming. It then becomes a non-story in our media, “politically incorrect,” when other scientists state that the evidence is faulty or there is no global warming.

The debate is too important to leave to the politicians. I am sure with their with their practical spirit, our seniors are saying ‘let’s not rush into foolish choices.’ We need to step back and let the scientists, not the politicians, make the call.

And what about some of the global warming specialists, including our Vice President Al Gore, who tells us unless we take drastic action, all these horrible consequences are going to take place in the next 10, to 20 to 30 years? We are measuring the climate with techniques and instruments we use to measure the weather. And, bless his heart, Willard Scott, he and other weathermen cannot tell the weather accurately day to day, no less than a year or a decade in advance.

Second, the experts tell us that we will have to cut back on emissions. Our own U.S. Department of Energy has estimated that we may need to cut back energy consumption about 10%, although it may be closer to a 20% or 30% cutback. This power will drastically increase the role of government and diminish freedom for individuals. Politicians are ready to make these cutbacks while scientists are still debating on the issue.

This proposed cutback in emissions of six greenhouse gases from the 1990 level, estimated as a 7% reduction for the United States, has serious consequences for all Americans. As Margo Thorning of the Center for Policy Research of the American Council for Capital Fromation has noted after a thorough study, the slowdown in economic growth (lowering GDP by 4% in 2009) would cause the projected budget surplus (excluding the Social Security surplus) to disappear. She concludes that “implementation of the Kyoto Protocol would make it much more difficult to: sustain tax cuts, ’save’ Social Security, promote the retirement security of the baby-boom generation or achieve other public policy goals.”

And third, this global warming hysteria will have a real impact, a negative one on senior citizens. Seniors are most vulnerable when economic slowdowns occur and especially in the case of drastic changes in the economic picture.

Seniors in many cases live on fixed incomes. An increase in taxes (e.g., such as the carbon tax) would have serious economic consequences for seniors, as it would pass through to their daily uses, including fuel, heating oil and air conditioning costs. A rise in unemployment would hurt seniors who might be forced into early retirement or may lose a post-retirement or a second job they hold to make ends meet. (This would be especially ironic just as Congress has voted to repeal the earnings limit on seniors between the ages of 65-69 receiving Social Security.) One study estimated that as many as one million additional people annually may be unemployed between the years 2001-2012 from emission reductions by just the curtailing of fossil fuel use alone.

However, beyond the uncertainty of the data on global warming, and the figures on cutbacks in the economy, I believe we must bring this matter down to the very human level to understand its impact on seniors.

Unemployment causes an array of problems, including loss of income, disruption of stability in life and health problems, especially depression. Remember a few years ago when a terrific heat wave hit the city of Chicago. The ones who died or became seriously ill were seniors with little or no air-conditioning. We can imagine how this would be multiplied in a post-Kyoto world if heating costs were become too costly for seniors and they are forced to cut back on heating oil and the same holds true for air conditioning. Health will be at risk and health costs will increase. Seniors are most vulnerable to these effects. The so-called experts on global warming ignore these individual results, which can soon become human tragedies. There is a greater danger to seniors from global warming policies than global warming itself!

It follows very logically: higher energy prices lead to slower economic growth; this in turn lowers personal income; then we have more unemployment; and then higher incidences of health problems occur, leading to increased and earlier deaths. We, as a humane nation, should not want to wish this fate on our seniors. As Joint Economic Committee economist James Carter has noted, treaty supporters “should explain why the benefits from an earth less than one degree cooler in 2050 are worth the [economic] carnage Kyoto would generate today.”

These are difficult times for our senior citizens who have given so much over the years and want to enjoy their remaining years in peace, contentment and prosperity. Ratifying the Kyoto treaty, either through legislation or by regulation, is a threat to all of these objectives. The 60 Plus Association is working actively to protect all these seniors from these dire consequences. And it is fortunate that we have a conference like this one today to focus on this important problem, which is getting so little attention from our mainstream media.

Although I disagree with the new ABC-TV anchorwoman whom you’ll soon see interviewing President Clinton in an upcoming one-hour show, Leonardo DiCaprio, the 25-year-old movie star of Titanic and one who brings his (quote) expertise (unquote) to this issue. He was quoted recently as saying that, “I personally feel this is the most highly ignored, yet important issue facing the world today.” Hyperbole at its typical Hollywood best! I would offer to young Leonardo the Senate’s rejection of the flawed Comprehensive Test Ban Treaty as a tad bit more important. If rogue are in a position to lob nuclear missiles at the United States, that will truly be global warming of real significance, not this trifling movement of the thermometer a mini-millimeter in either direction. My time is up.

I thank you for yours.

Testimony Of James L. Martin, President, 60 Plus Association
Delivered To The Senate Finance Committee, Senate Of Pennsylvania, Monaca, Pennsylvania

Madam Chairman and Members of the Senate Finance Committee, I am James L. Martin, president of the 60 Plus Association, and it is indeed a pleasure to be here testifying before this distinguished committee.

This committee is considering an issue of very strong interest to me and my organization– the reduction, and hopefully, eventual repeal of the Pennsylvania inheritance tax, one of the highest, I might add, in our nation.

Let me now mention something about the 60 Plus Association. We are a seven-year old, nonpartisan, national senior citizens’ advocacy organization that has, as its main mission abolishment of the federal estate tax.

Congress has imposed a levy on everything that can conceivably be taxed: income, sales, property, gasoline, and food– the list is endless. A tax is extracted from fans who attend sports or other entertainment events, but a tax for dying? Seniors say, rather emphatically, that DYING SHOULD NOT BE A TAXABLE EVENT!

60 Plus devotes a substantial portion of its resources to eliminating this most unfair and most confiscatory of all taxes. It’s actually a revenue loser, a disincentive to job creation and thus more tax revenue. It’s anti-family because nearly 90% of family-owned businesses don’t survive past the second generation. Sen. Jon Kyl of Arizona and Rep. Chris Cox of California, the chief sponsors of repeal, call their legislation the Family Heritage Preservation Act.

Benjamin Franklin proclaimed: ” In this world nothing can be said to be certain except death and taxes.” However as a result of the “death” tax, you can add a third: taxes AFTER death.

60 Plus has created the Benjamin Franklin Award to recognize the efforts of members of Congress in both parties who have sponsored legislation to repeal the “death” tax and make Franklin’s axiom true again.

60 Plus represents a half-million seniors nationally, with several thousand here in Pennsylvania, none wealthy that I know of, but who are outraged by the grim reality that they can be taxed just for dying.

I hear from many of them. One recently wrote, “At this time of life, we seniors should have the peace of mind that the fruits of our labors, after taxes, will be shared with our heirs.”

Another said, “The inheritance tax is on top of several tiers of taxes.”

Another: “Many farmers’ children have to sell the farm to pay this tax.”

Another: “My elderly parents died, leaving us 5 children with a 600-acre farm. Farm prices had risen greatly, resulting in heavy assessments of the inheritance tax. Within three years, land values had declined to where the land could not be sold for enough to pay for those taxes.

Another: ” The more successful a citizen is in this great country, the more he is penalized, even when he dies. Americans work very hard for themselves and their children and due to these unfair taxes, the children suffer.”

Another: “It astounds me how much it costs to die.”

Another: “Please ban this dumb law.”

And finally, “All of us work hard for what we have, and a lot of that effort is motivated by the desire to provide for our spouse and give our children a better life… it matters that it gets passed on, intact, and whole, without the government taking any more of this hard-earned legacy away from us.”

60 Plus does not believe that dying should be a taxable event.

We do not believe that families should have to deal with the Internal Revenue Service and the undertaker almost simultaneously.

We support the complete and total repeal of the federal estate tax.

However, we also realize another reality. Despite the federal estate tax, which essentially taxes assets, which have already been taxed, there is a first cousin to Uncle Sam ready to collect again — the tax collector in Harrisburg who hits the heirs again with an inheritance tax.

That current tax is six percent for lineal descendants and a whopping 15 percent for non-lineal descendents.

In a recent issue of Forbes magazine (June 14, 1999) featuring a story on the inheritance tax, Pennsylvania received the dubious distinction of being in the category “Grabbiest States.”

These were states that “impose an inheritance or death tax and have relatively high personal income or capital gains taxes.” Pennsylvania was included as among “the worst states to die in.”

In addition, the inheritance tax may serve to encourage seniors to leave the state of Pennsylvania after retirement and to go to states that have no inheritance tax. As New York Gov. George Pataki is fond of saying while working to abolish or lower his state’s inheritance tax: “New York’s seniors aren’t moving to Florida and Arizona just for the sunshine!”

Thirty-five states have no death or inheritance tax. And the trend has been toward abolishing, or at least lowering inheritance taxes.

I was in North Carolina last year when the legislature met in late session and acted to repeal its inheritance tax. I also testified last year in the state of Maryland and Maryland has started down the road to eventual repeal by cutting its inheritance tax.

Pennsylvania can join the parade of states chopping down one of the most confiscatory taxes– and it can do so to benefit its citizens, especially its senior citizens.

I commend Senator Melissa A. Hart, the Chairman of the Senate Finance Committee, for holding these hearings highlighting this important issue.

I commend her for her leadership in sponsoring Senate Bill 185 and her co-sponsors that would reduce the inheritance taxes on transfers to siblings from 15 percent to 6 percent.

I also wanted to mention Senate Bill 318 introduced by Senator Jay Costa which would exempt the first $100,000 of the taxable value of an estate from the state’s inheritance, an exemption which would apply about to the 6 percent on transfer to family members and the 15 percent on transfers to other individuals.

Also, in this category of relief is Senator Jake Corman’s Senate Bill 827, which would reduce the inheritance on lineal descendents from 6 to 5 percent.

I note that these are proposals offered and co-sponsored by members from both political parties and that’s encouraging.

Let me mention another issue of special concern to seniors and which is also within the jurisdiction of this committee. This matter is the long-term care issue, a matter of growing concern to seniors and their children.

Planning ahead is the key to taking care of this issue as more and more of our seniors are living to a ripe old age.

We enthusiastically support Chairman Hart’s bill, Senate Bill 1456, that would give inheritance tax exemptions for long term care insurance premiums paid up to 10 years prior to an individual’s death. Everyone benefits from this situation — care will be provided for seniors if needed; families save money; taxpayers save money.

This committee has the opportunity to really help seniors. I urge you to lift this burden from the back of seniors and their heirs. Seniors throughout Pennsylvania will be grateful to all of you.

Now, I’d like to turn my attention briefly to the history of the federal estate, or as it is commonly called the death tax.

If the label “death” tax seems uncommonly tasteless, let me assure you it has many other names much more grotesque, if you will, and all share one common thread. They were born out of a sense of frustration by the bizarre fact that the tax is triggered for no other reason than death itself.

That’s why the 60 Plus Association’s battle cry is that DYING SHOULD NOT BE A TAXABLE EVENT!

Besides the death tax, it’s been called, in no uncertain language, the grave-robber’s tax, the grim reaper’s tax, a job-robber’s tax, an anti-savings tax, a departure tax, an exit tax, a vulture tax, a cruel tax, a success tax, a voluntary tax. …It seems we add another name weekly.

Perhaps a cruel tax, a name given it by Mr. William Morris, publisher of the Augusta (GA) Chronicle, a paper for which I was a reporter covering Congress when I went to Washington way back in 1962. For what is more cruel than while grieving over the loss of a loved one, you must prepare for a visit by the first claimant in line, and he’s not even a blood relative, Uncle Sam, waiting with outstretched palm for up to 55% of your after tax assets.

The 60 Plus Association recognizes the federal estate tax and the state inheritance tax are “kissing cousins.”

The federal estate is levied on the capital value of property changing hands at the death of the owner, and is fixed mainly by its total value, and the inheritance tax is levied on what is passed on to the heirs.

Usually wars have been the justification for adoption of a federal estate tax. We had our first one in 1797, which paid for a buildup of the U.S. Navy during a time of tension with France. Five years later (1802) it was repealed.

Congress enacted it again 60 years later in 1862 for revenue raising during the Civil War and then it met repeal in 1870. Our third venture in this area of taxation occurred with the Spanish-American War and it lasted from 1898 to 1902.

We have had the present federal estate tax since 1916, and have had some modifications on it in recent years. For example, the exemption was $600,000 until it was bumped up to $625,000 last year and $650,000 this year, with it due to rise to $1,000,000 by the year 2006, unless it’s outright repealed. By the way, the exemption in 1916 was $50,000, far less than today’s $650,000. However, adjusting for the growth in wealth, in today’s dollars, the exemption would have to be about 9 million to be comparable to that of 1916. It is interesting to me that while Congress is proud of this increase to $650,000, a retired farmer told 60 Plus he hoped Congress would stop doing him such favors, that he spent most of the increase on lawyers and accountants to figure out the maze of the new tax regulations imposed by Congress.

The 1916 tax was adopted to help the U.S. finance mobilization for the First World War. As with so many taxes, it has remained in place since that time. Fortunately, the Financial Freedom Act of 1999, which is being considered by the U.S. House of Representatives this week, phases out this tax after 10 years. Although the 60 Plus Association favors complete and immediate repeal of the federal estate tax, we do support this phase-out measure as an important goal towards eventual repeal.

Actually, the inheritance tax is one of the oldest forms of taxation we have in existence. We find evidence of it in ancient Egypt and Greece. A version similar to later models dates back at least to the Roman Empire, which levied a one-twentieth-portion tax on property inherited to pay for the pensions of veteran soldiers.

Perhaps the real basis of the modern inheritance taxes springs from the Middle Ages. Then, according to legal theory, the sovereign owned all the land and property and in this feudal arrangement permission of the sovereign was required to transfer any upon the death of the owner.

In cases where there were no direct descendants, relatives of the deceased were able to obtain the property through payment of an amount called “relief.” These “relief” payments can legitimately be viewed as the origins of the inheritance tax in such European countries as England, Spain Portugal, and the Netherlands.

Throughout history, various groups began pushing taxes on inheritance in order to achieve certain socially desirable end results: the ending of a concentration of wealth, redistributing wealth, and assuring an additional source of income for government. The idea limiting inheritance became a popular platform item with some of the utopian socialist movements as one way to restrict control, ownership and additional accumulation of property. Even Karl Marx and Friedrich Engels in “The Communist Manifesto” saw as one of the key measures of the proletariat gaining political supremacy in the more advanced countries through a series of attacks on private property including abolition of all rights of inheritance.

In the United States, for instance, we have had, and repealed federal estate taxes, but inheritance taxes have always been collected by the individual states.

Pennsylvania, in this regard, became famous or infamous, by levying the first state inheritance tax 173 years ago, in 1826.

New York State did so in 1885. By 1900, a total of 20 states had enacted inheritance taxes. Wisconsin established a new trend in 1903 with two innovations: progressive rates for the inheritance tax and discrimination in rates based on relationship of the heirs to the deceased.

The inheritance tax, as well as the federal estate tax, is triggered by one event: death.

Other states, over the intervening years, followed suit. However, in recent years, the trend has been in the other direction, namely repealing the state inheritance taxes.

A decade ago a total of 26 states imposed some type of inheritance or estate tax (above their automatic cut of the federal estate tax). This has fallen to 15 states.

Thus, 35 states and the District of Columbia impose no inheritance taxes.

In an informative article in Forbes magazine, writer Carrie Coolidge makes the interesting observation: “You can’t beat the Grim Reaper. But you can outrun the state tax collector.” (“Death traps,” June 14, 1999). She outlines the “Grabbiest States,” those states that impose an inheritance or death tax and have relatively high personal income or capital gains tax. Pennsylvania is one of nine states to make the list of the “worst states to die in.”

The other categories include “Better, but not good,” those states that impose an inheritance or death tax but have lower or no income or capital gains taxes. Eight states fall into this category.

And the next category is the “Estate-friendly” ones, which include states with no death or inheritance taxes. And the final category embraces those states with no death or inheritance taxes and no personal or capital gains taxes. Six states make up this ideal category.

Perhaps the work of this committee will move Pennsylvania into one of those other and more desirable categories for their taxpayers.

Interestingly enough, we hear similar arguments every time this issue comes up, we hear about the loss of revenue, the loss of inequity in taxation and the loss of fairness in the system since only a small proportion of people pay. Quite frankly, none of these arguments are very convincing.

California repealed their inheritance tax by referendum in 1982. Though only 2 percent of the population might have been affected, over 65 percent of the people voted to repeal.

Proponents of repeal realize that inheritance taxes are unfair, cause people to move out of the state, and limit expansion of businesses, retards creation of jobs, and results in break up of family property.

These negative trends should be especially of concern to states in the northeast such as Pennsylvania. Again, as Governor Pataki observed, people are not moving to Florida and Arizona just for the sunshine.

To those who claim “death” tax repeal is a “tax cut for the rich,” 60 Plus says, “that horse has long been dead, so please, dismount!” For the rich, the Bill Gateses, the Ted Turners, have lawyers and accountants to protect their after-tax assets with trusts and foundations, and who can blame them? Even Oprah Winfrey has expressed her dissatisfaction with the realization that when she dies, Uncle Sam is first in line. As she lamented on her TV show, she found that fact “irritating,” to say the least.

An excerpt from her August 4, 1997 show is as follows:

“Here’s Mr. Herb Nass, a New York lawyer who has handled the estates of well-known millionaires and is the author of this book, ‘Wills of the Rich and Famous’. He has seen the wills of scores of celebrities and can offer us some insight into what they may have been thinking when they drafted their last will and testament. Let’s start with Jackie Kennedy Onassis. What does her will say about her?”

Mr. Nass: The bulk of her estate was left to her two children, John and Caroline.

Winfrey: So all those things that were auctioned off — I had heard this too, from some family members — they — they kept all the things that they really valued themselves and that they wanted themselves.

Mr.Nass: Correct. That auction netted over $34 million for her estate, though. And those funds were paid to her two children, subject to estate tax.

Winfrey: And isn’t that estate tax 55 percent?

Mr. Nass: At that level of wealth, yes. Her –her estate …

Winfrey: Yes. I think it’s so irritating that once I die, 55 percent of my money goes to the United States government.

Mr. Nass: Well, you should give it away while you’re alive then.

Winfrey: That’s what I’m trying to do. You know why that’s irritating? Because you would have already paid nearly 50 percent.

Mr. Nass: Correct. It’s really double tax.

Winfrey: You would have already paid — it’s double tax.

Mr. Nass: You’re taxed on your income and your estate. Alternatively…

Winfrey: And therefore, when you leave like a house or you leave money to people, then they’re taxed 55 percent, so you’ve got to leave them enough so that once they’re taxed, they still have some money.

Mr. Nass: Correct. Correct.

Winfrey: That’s why you always hear about people where their aunts left them houses or left them stuff and they can’t keep the house because the taxes are so much.

Mr. Nass: Well, charity is one other alternative. Sometimes wealthy people set up charitable foundations, which is a vehicle for avoiding the estate tax.

Winfrey: You’re talking to me.

Mr. Nass: I’m talking to you.

Winfrey: Unbelievable

“Coming up, how complete strangers got most of the money from Marilyn Monroe’s will. Details on that when we come back. Fifty-five percent — irritating.”

Mr. Nass: It is. Wealth foundations are the way to go. …

Instead it’s actually small mom and pop businesses that are hurt the most, the Chester Thigpen’s, the Mississippi tree farmer, the 88-year-old grandson of slaves, who has testified before Congress and who has worked with 60 Plus to repeal the death tax, before he became too ill to travel.

It’s Chris Bennett, radio station owner in Seattle, Washington who points out that a chain of minority owned newspapers face extinction because they don’t have the liquid assets to pay this tax bill, including, according to Mr. Bennett, the Sun Reporter Group in the San Francisco Bay area, The Los Angeles Sentinel, The Chicago Daily Defender chain of newspapers, The Cleveland Call & Post as well as The Afro American Newspapers, an east coast chain which publishes in cities such as Richmond, Washington, D.C., Baltimore, and Philadelphia, and also the New York Amsterdam News.

I’ve spoken with Alexis Scott Reeves, struggling to keep her paper, the Atlanta (GA) World, in the family after the death of the principal owner.

In the newspaper business, in general, as Frank Blethen, publisher of the Seattle Times, likes to point out, there were 2,100 independently owned daily newspapers in the United States in 1910. This number dropped to 700 in 1980 and today stands at approximately 300. The burden of estate taxes is one of the largest challenges facing family-owned newspapers, a fact heartily agreed to by other veteran newspapermen, Arizona publishers Donovan Kramer Sr., and Donovan Kramer, Jr.

Also, a study by Kennesaw State College, Marietta, Georgia, confirms that minority –owned companies, just starting out, find the tax a major hindrance to job expansion. In that regard, Harry C. Alford, Jr., President of the National Black Chamber of Commerce, has written an excellent editorial in which he makes the case that getting rid of the death tax “will start to create a needed legacy and begin a cycle of wealth building for blacks in this country. That would be a great start to breaking the economic chains that bind us.” He urges members of the Congressional Black Caucus to end the “death tax.”

Repeal is not a liberal or conservative issue, either. To social redistributionists who have favored this tax as a “means to social justice,” 60 Plus cites testimony by USC Law Professor Edward J. McCaffrey who says as an “unrequited liberal,” he now concludes that the tax is hurting those it was intended to help, because of its hindrance to job expansion, and serious thought should be given to repeal, a policy 60 Plus has always advocated.

Various experts from across the political spectrum have centered their criticism on the motivation and reality of the estate and inheritance taxes.

Two prominent liberal economists, Aaron and Alicia Munnell, noted the following in their study of the estate tax:

“In short, the estate and gift taxes in the United States have failed to achieve their intended purposes. They raise little revenue. They impose large excess burdens. They are unfair.” (“Reassessing the Role for Wealth Transfer Taxes,” National Tax Journal, June 1992.)

And Nobel-prize winning conservative economist Milton Friedman poses it as a policy question: “Finally, it seems illogical to say that a man is entitled to what he has produced by personal capacities or to the produce of the wealth he has accumulated, but that he is not entitled to pass any wealth on to his children; to say that a man may use his income for riotous living but may not give it to his heirs.” (Capitalism and Freedom, 1963). To paraphrase Dr. Friedman, he indicates that the tax sends a bad message to savers, to wit: you may as well spend your money on wine and song, because Uncle Sam is going to get the largest piece of it.

The evidence is in for all to see. It is time for the death knell to be sounded for both the federal estate and state inheritance taxes.

It is important to note, as I wrote in an opinion piece for The Washington Times (“The death tax is killing the family,” May 22, 1997) eliminating the estate tax as well as the inheritance tax, is “not a tax cut for the rich.” The real rich do not pay it as they have their lawyers, financial planners and accountants devise all types of means to avoid it. The burden falls on middle-class Americans who may lack liquid assets but find that a family tree farm, a small business or a ranch must be sold to pay for the federal estate tax and/or inheritance taxes. The 60 Plus Association has championed the cause of Mr. Thigpen, the 88-year-old Mississippi tree farmer and a grandson of slaves, whose ecology-winning tree farm may have to be sold when he passes on. He is cash poor but has property. He wants to leave that farm to his wife and five children but the federal estate tax and the Mississippi inheritance taxes will stand in the way.

The inheritance tax is harmful to a wide range of people. We want to encourage minorities and women to get more involved in owning businesses. We can see that the federal estate tax and a state inheritance tax can be detriments and can limit opportunities.

The 60 Plus Association commissioned a public opinion poll on the death tax. This poll was conducted by the Polling Company. We asked whether the person would be More or Less likely to vote for a member of Congress if they voted to eliminate the death tax. We found an overwhelming 77 percent would be more likely to vote for their Member of Congress if he or she voted to eliminate the death tax. Not that they’re affected by it, but they cited the unfairness of a tax on assets, which have already been taxed!

Opposition to this tax cuts across all demographic groups. It is especially significant when we review whether individuals believe this tax is fair or unfair. Here were the percentages: not yet moms (women aged 18-34 with no children), 86 percent; pre-retirees (voters aged 55-64), 84 percent; Liberals 74 percent; and those of a low socio-economic status (individuals with a high school diploma or less, earning under $25,000), 73 percent.

And in a very informative study by the Joint Economic Committee of the U.S. Congress (“The Economics of the Estate Tax,” December, 1998), it concludes that the estate tax generates costs to the taxpayers, the economy and the environment that far exceeds any benefits that it may produce.

The study also considers the devastating impact of the tax on small and medium-sized family-owned businesses and the people they employ. As you are aware, the maximum rate of 55 percent is imposed on estates with a value equal to or in excess of $3 million even if such value is comprised largely of non-liquid assets, which often is the case with family-owned and operated businesses and farms. To prepare for expected death tax liability, many businesses are forced to borrow funds, mortgage assets, pay expensive insurance premiums, and generally structure assets in an unproductive way that is purely tax motivated. In the frequent case in which a family, upon the death of a patriarch or matriarch, is forced to liquidate all or a portion of the business to raise the cash necessary to pay the death tax, the same precious resources that are expended on the death tax planning and liability could be more usefully applied towards reinvestment in business and the creation of new jobs.

In sum, the study is most helpful in terms of documenting the negative collateral impacts of the death tax and in examining the degree to which repeal of the death tax would increase levels of savings and investment, expand the economy, and result in higher federal tax receipts.

Among the new Joint Economic Committee findings are:

The Death Tax this century has reduced the stock of capital in the economy by approximately $497 billion.

The Death Tax causes inefficient allocation of resources, discouraging saving and investment and lowering the after-tax return on investments.

Death tax rates are extremely punitive, with marginal rates from 37 percent to nearly 55 percent.

The Death Tax obstructs environmental conservation. Large Death Tax bills often force families to sell environmentally sensitive land.

The Death Tax is a “virtue tax” because it penalizes work, saving and thrift in favor of large-scale consumption.

Empirical and theoretical research indicates that the Death Tax fails to reduce inequality, and may actually increase inequality of consumption.

Enormous compliance costs associated with the Death Tax are of the same general magnitude as its revenue yield, or about $23 billion in 1998.

Thus, the Death Tax raises very little, if any, net revenue for the federal government.

One very perceptive poem expresses this burden put on the taxpayers. This anonymous poem is one we have circulated on Capitol Hill and has been placed in the Congressional Record. It reads as follows:

Tax his cow, tax his goat,

Tax his pants, tax his coat,

Tax his crops, tax his work,

Tax his tie, tax his shirt.

Tax his tractor, tax his mule,

Teach him taxes are a rule,

Tax his oil, tax his gas,

Tax his notes, tax his cash;

Tax him good and let him know,

After taxes he has no dough.

If he hollers, tax him more;

Tax him ’til he’s good and sore.

Tax his coffin, tax his grave,

Tax the sod in which he lays.

Put these words upon his tomb:

“Taxes drove me to my doom.”

And after he’s gone, he can’t relax;

They’ll soon be after his Inheritance Tax!

As a chief proponent of repeal has stated: “The absurdity of this tax is illustrated by the fact we’re issued a certificate at birth, a license at marriage, and a bill at death.” That was a direct quote from Rep. Jennifer Dunn (R-WA), co-author of rate direction leading to final repeal, along with Rep. John Tanner (D-TN).

A tax should benefit society but this one has no socially redeeming value, benefiting not society as a whole, but only a clutch of lawyers and accountants. Actually, there are thousands of law firms making huge sums setting up trusts and foundations to help their clients avoid the tax. But, happily, there are a number of attorneys who, believe it or not, are working to repeal this tax. Most prominent among them, a first among equals is Harold Apolinsky of Birmingham, Alabama, who points out that his firm has 10 trust and estate lawyers out of 120. His firm believes that instead of losing work, there will be more legal fees once repeal is accomplished due to job creation and start up of new businesses!

Seniors are hopping mad about a tax triggered only by the act of dying.

Let’s repeal this socially unconscionable negative revenue-producing, job-robbing tax a fourth and final time!

I’ve lived and worked for nearly 37 years in Washington, starting as a young newspaper reporter covering Congress way back in 1962, when John F. Kennedy was in the White House, and Neil Armstrong had not yet walked on the moon. Pennsylvania’s Senators then were Hugh Scott (Republican) and Joe Clark (Democrat) while the Governor was a young Republican named Bill Scranton. So I’ve seen a lot of history come and a lot of history go and I’ve seen a lot of taxes come, but not many taxes go.

But here’s one tax whose time to go … has come!

In addition, I sincerely hope the great Commonwealth of Pennsylvania will also join the 35 other states and repeal its inheritance tax. Thank you for your time.

Address By James L. Martin, President, 60 Plus Association
Delivered At A Seminar Sponsored By The 60 Plus Association On The 62Nd Anniversary Of The Signing Of The Social Security Act, Washington, D.C.

“When I came to Washington as a newspaper reporter in 1962, John F. Kennedy was in the White House, Neal Armstrong had not yet walked on the moon, Strom Thurmond was a Democrat and the problems with Social Security were perceived by few other than Barry Goldwater.

So today, August 14, 1997, on the 62nd anniversary of Social Security, the 60 Plus Association becomes the first seniors group to publicly go on record to overhaul the system, releasing a paper it commissioned by economist Richard A. Hart, entitled “Personalizing Social Security: Unplugging the Third Rail.” Why did a senior citizens group decide to tackle the issue of Social Security reform? Let me answer by citing a question I’m asked often about the program signed into law by Franklin Delano Roosevelt on August 14, 1935.

The question is always the same, “Jim, why get involved?” After all, the theory goes, even if the current system is going bankrupt, “your seniors are protected, so why bother with the uncertain future of this politically volatile issue?”

Believe me, it would be easy to take a head-in-the-sand approach as so many do, including, I’m sorry to say, other senior citizen groups. Unfortunately, this attitude leads to a false impression that seniors are “greedy old geezers,” a “gimme, gimme, gimme” mentality which I hope to dispel. Seniors who built this country, in Depression and war time, through their blood, sweat and tears, deserve better.

To help dispel that erroneous image, I harken back to some of the advice one particular senior citizen has given me, and still does — my favorite senior — my mom, my sainted mother, if you will, Mary L. Martin, who in her eighties, still works part-time! Her advice is that seniors’ most valued assets are not their social security, their retirement income or their pensions — although these are certainly near the top of their list — but in her opinion, seniors’ most valuable assets are their children, their grandchildren and their great grandchildren.

So that’s why I decided to involve 60 Plus, a seniors group responsibly trying to find a solution to the problem, for the sake of our children and our grandchildren.

To put it bluntly, Heritage Foundation economist Dan Mitchell said, or perhaps it was another often quoted economist, Americans for Tax Reform’s Peter Ferrara, who said: “Security was a Ponzi theme then. It’s a Ponzi scheme now.” But even a Ponzi scheme — borrowing from Peter to pay Paul — worked well in the beginning, not only for Carlos Ponzi but for others, just as the so-called Social Security Ponzi Scheme worked well for seniors. But there looms now a “run on the Ponzi bank” as the Baby Boomers prepare to retire.

As Mr. Hart states in his paper, “the Social Security retirement train is on a collision course with demographics. Social Security’s pay–as-you-go system, where the taxes of today’s workers are transferred to today’s retirees, leaves it particularly vulnerable to demographic trends. As Baby Boomers age, life expectancy is rising and birth rates are falling. As the Social Security train heads straight into a demographic wall.” Mr. Hart continues, “more and more Americans anticipate the oncoming wreck.” Mr. Hart is right. More and more of us recognize the looming crisis.

A recent poll said that a majority of Democrats, for the first time, acknowledged not only that there was a problem with the system, but a majority of Democrats now even favor privatization as a solution. Everybody universally agrees there’s a problem. But a solution remains elusive.

For example, President Clinton’s Social Security Advisory Council has issued its long awaited report. This 13-member panel of experts readily agreed there is a problem, but did they agree on a solution? Well, yes and no. They offered three solutions. It’s not an exaggeration to say they split three ways from Sunday, six endorsing one, five another and two yet a third. Significantly, all three directly, or indirectly, advocated privatization. In 1983, President Reagan’s Social Security Reform Commission came forth with its solution to keep the system solvent for, it said, at least another 75 years, well into the next century.

That begs the question, why another Commission so soon in the 1990s, after the 1983 Commission? The answer is that the system is in more trouble than previously thought. The problem is two-fold. One: The good news is that we seniors are living longer, due to medical advances and our own better health habits. Two: The bad news is that you younger generations have to pay.

Of course, that’s the way the system has always worked. But before there were more than 20 workers, not three paying into the system for each beneficiary. One other fact that bears noting is that when first enacted, according to the actuarial tables, seniors died at about age 64, or as Mr. Hart so delicately phrases it, most workers were conveniently dead and buried before they could collect their benefits at age 65. As 60 Plus Honorary Chairman, former Congressman Roger Zion puts it, at a vigorous and robust 75, he has been statistically dead for 11 years. Now that seniors are living longer, that places further financial strains on the system. Clearly, a day of reckoning has come. The old fix of just raising taxes, some 51 times in 62 years, cannot continue. There’s a limit.

There have been half-hearted attempts in the past to address the problem, half-hearted because not many politicians want to be accused of touching the so-called third rail. You know the old song — Social Security is the third rail of politics, touch it and you die.

Politicians have gotten away with this third rail scare tactic for too long, scaring seniors for political gain. Some of us recall the 1964 Barry Goldwater — Lyndon Johnson Presidential campaign when there was a TV commercial showing a giant pair of scissors cutting a Social Security card with a voice-over solemnly intoning that this would be the result if you voted for Goldwater. Another 1964 commercial also stated that a vote for Goldwater could result in U.S. soldiers being sent to fight and die in southeast Asia. Well as one political wag put it, he “voted for Barry and sure enough, U.S. soldiers were soon sent to fight and die in Vietnam.”

So, I would like to put politicians, regardless of party, on notice that seniors are tired of falsely being told their Social Security is going to be taken away. It’s more likely that a meteorite will fall on the Social Security Administration Building in Baltimore before a politician, of either party, would propose taking away Social Security.

Let me point out how 60 Plus became engaged on this issue. A few years ago the Third Millenium, Generation X’ers in the 18-34 age group, announced the startling news that most X’ers believed in UFOs (unidentified flying objects) than that the system would be around when they retired. I responded on a radio talk show that seniors are also aware that the system is headed for bankruptcy. Then I added, somewhat flippantly, perhaps, that seniors believe more in the second coming (has it been twenty years this week?) of Elvis Presley than in the system’s future solvency and that seniors might also prefer changes. After a few call-ins and further discussion of UFO’s and Elvis, I decided to poll senior citizens. Our poll to approximately 100,000 seniors found that, by a surprising 3-to-1 margin, seniors preferred a privatized system. We then commissioned a survey by pollster Frank Luntz, an excerpt of which is in the study we’ve released. The Luntz poll confirmed our 3-to-1 ratio.

We were called by Insight Magazine, and we debated, in print, our counterpart at the American Association of Retired Persons, Horace Deets, in dueling 2000-word essays. If I could sum up each essay in one word, it would be: AARP — taxation, 60 Plus — privatization. AARP favors the same old solution, tax increases, while 60 Plus looks for new solutions.

Will privatization work? The privatization model is the Chilean system. During the 1983 Social Security Study, when Chile was mentioned as a solution, the status quo seekers dismissed their system as a new and unproven experiment. But fast forward 15 years later and Chile now has an amazing track record of success. Now the status quo seekers try to demonize the word “private,” implying that you have to be stock market expert or the big boys on Wall Street will fleece you. Nothing could be further from the truth. There are a lot of workers in Chile who can’t play the stock market but who proudly walk around with a passport-sized book with their name on it, keeping track of their investments. That is one of the reasons we use the word “personalize,” because the system would allow each and every individual to take control of his or her own financial destiny.

Since 60 Plus is nonpartisan, we credit legislators from both parties for coming up with innovative ideas. One is Democratic Sen. Bob Kerrey of Nebraska from whom we borrowed the word “personalize.” Another is suggestion, by one of the Generation X’ers, is to “modernize” the system. Many others on Capitol Hill deserve credit, including Republican Congressman Jim Kolbe of Arizona and Democratic Congressman Charlie Stenholm of Texas, co-chairs of a public pension reform caucus which now numbers more than 70 members of Congress, equally represented by both parties. Michigan Congressman Nick Smith has introduced legislation to address the problem as have Reps. Mark Sanford of South Carolina, David McIntosh of Indiana, Mark Neumann of Wisconsin and John Porter of Illinois. Others safeguarding Social Security include House Ways and Means Committee Chairman Bill Archer of Texas and Subcommittee Chairman, Reps. Bill Thomas of California, Dennis Hastert of Illinois and Jim Bunning of Kentucky. Surely, the latter, Jim Bunning, the big, burly Hall of Fame baseball pitcher — known as a fierce competitor in his playing days and now the father of nine and grandfather of 31 (at last count) — would be a formidable opponent for those who try to demagogue Social Security as they did in the 1980s when some members of Congress courageously talked about reform in order to save it.

More than two dozen countries in South America, Europe and Asia have adopted, or are in the process of adopting, a Chilean-style system. Even socialist Sweden is going that route. And here, workers in three Texas counties, before a loophole in the law was closed, opted for privatization and their rate of return in making a lot of serious discussion as they prepare for retirement. Moreover, a resolution recently passed both the House and Senate in Oregon asking the state to opt out of the Social Security System and create a separate retirement system for state workers.

So the slight spark across the sky of the Chilean experiment has become a bright con-stellation. It’s a success story that I believe, with all my heart and soul, can be a guide for our own troubled system.

Incidentally, in the old days, the father of the Chilean plan, Dr. Jose Pinera, literally visited Washington in the dead of night because his untested plan was so controversial. But a few years ago, the Cato Institute gave a dinner in his honor and a number of Members of Congress allowed their names to be placed on the host committee. What a change in attitude. Of course, it was not lost on them that this former minister of labor was elected to office himself, with a major plan in his platform, his plan to privatize social security.

Having read an article by Ed Crane, President of the Cato Institute, about the social security problem, we started searching for solutions. We kept being referred back to the Cato Institute itself, which has taken a pioneering road ion this issue for more than a dozen years. One name kept coming up, time and time again. That name was Michael Tanner, Cato’s Director of Health and Welfare Studies and the author of several books on health and welfare reform. Mr. Tanner has worked on the Social Security issue extensively, to say the least. Spoken on it. Written on it. Debated on it, around the world often with Dr. Pinera at his side. That’s why 60 Plus, particularly Roger Zion and I, are so pleased that Mr. Tanner has not only eloquently embraced this new plan Mr. Hart proposes, but has joined us at today’s official release of the proposal, along with an equally strong endorsement by today’s other featured speaker, Fund for a New Generation’s Adam Dubitsky.

Richard A. Hart takes up the challenge to find a solution in an insightful paper showing how Personal Retirement Accounts (PRAs) can assure both dignity and comfort for future generations of senior citizens. This paper, a variation on a theme advanced by others should continue the dialogue on a system which urgently needs reform.

To those who fear Social Security’s ruin, wise seniors know that there is no Social Security Trust Fund. 60 Plus calls it the Social Security Bust Fund as surpluses are used for other government programs. As Democratic Senator Ernest Hollings of South Carolina has said, “There is not trust. There is no fund.” We need to alert people to keep at arm’s length those politicians who spread fear among seniors, as we stand at a crossroads to which direction Social Security reform should go.

In the 60 Plus Association’s opinion, some form of “personalization” remains the best and most feasible option. We must guarantee present retirees their benefits as part of a government promise to them, but we must also safeguard current generations paying in to the system so that the benefits will be there when they retire.

August 14, 1935, President Roosevelt signed into law the Social Security Act. On May 2, 1997, the FDR Memorial was opened here in Washington, D.C. The Social Security act helped seniors escape poverty, but we now know there are major problems facing future generations. What more lasting commemoration to FDR can we embrace than the adoption of a system which will save it for a new age, a new era, and a new population.