TAX REFORM STUDIES AND PROPOSALS U.S. TREASURY DEPARTMENT JOINT PUBLICATION COMMITTEE ON WAYS AND MEANS OF THE U.S. HOUSE OF REPRESENTATIVES AND COMMITTEE ON FINANCE OF THE U.S. SENATE Hon. DAVID M. KENNEDY, COMMITTEE ON WAYS AND MEANS, Washington, D.C., January 29, 1969. DEAR MR. SECRETARY: As you know, by letter to the Speaker of the House of Representatives dated December 31, 1968, President Johnson formally advised the Congress of the existence of the studies and proposals for tax reform which were developed by the staff of the Treasury Department, pursuant to the Revenue and Expenditure Control Act of 1968, and of his decision to make no recommendations to the Congress in the light of the fact that he would be leaving office on January 20. This communication also referred to the fact that the material contained in the studies and proposals would be made available to the Committee on Ways and Means of the House of Representatives and to the Finance Committee of the U.S. Senate at such time as those committees might request such material. You will also recall the meeting which we had some days ago at which time the senior members of our respective committees discussed with you the procedures which might be followed with regard to obtaining these studies and proposals. The purpose of this letter is to request, on behalf of the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate that you make available to our respective committees the studies and proposals to which reference is made. It would be appreciated if you could provide a copy to each committee at your earliest convenience. With kindest regards, Sincerely yours, WILBUR D. MILLS, Chairman, Committee on Ways and Means, House of Repre sentatives. RUSSELL B. LONG, Chairman, Committee on Finance, U.S. Senate. Hon. WILBUR D. MILLS, THE SECRETARY OF THE TREASURY, Chairman, Committee on Ways and Means, Washington, D.C. DEAR MR. CHAIRMAN: In response to our earlier understanding and your request in the letter of January 29 from both you and Chairman Russell B. Long, Committee on Finance, U.S. Senate, I enclose herewith a copy of the tax reform studies and proposals for the Committee on Ways and Means of the House of Representatives. As you know, these studies and proposals for tax reform were developed by the Treasury Department during the administration of President Johnson and were transmitted to me by then Secretary Joseph W. Barr on January 17, 1969. Sincerely yours, DAVID M. KENNEDY. Hon. DAVID M. KENNEDY, THE SECRETARY OF THE TREASURY, Washington, D.C., January 17, 1969. DEAR MR. KENNEDY: The attached are the studies and proposals regarding tax reform which were reviewed by Secretary Fowler prior to his leaving the Treasury Department, together with his accompanying statement which was approved by him. The last paragraph of that statement states as follows: We have been conducting Treasury staff studies as background respecting proposals for * * * particular industries. However, they are not sufficiently mature or complete to support specific proposals at this time. These studies are going forward and should be available to Congress in the next session. Since that date some of the material referred to in that last paragraph has been completed. These staff studies are therefore attached hereto as supplementary material, as background for the development and assessment of proposals in the areas with which they deal. Sincerely yours, JOSEPH W. BARR. CONTENTS [This table of contents has been expanded by the printer to include subheadings] PART 1 I. Statement of the Honorable Henry H. Fowler, Secretary of the Treasury, for the Congress of the United States, on the Tax Reform Program__ II. General Description of Proposals-- Estate and gift taxes.. Page 3 Taxation of appreciation of assets transferred at death or by gift__ Orphan children's deduction--- Unification of the estate and gift taxes. Arrangements for generation skipping.... Exemptions Liberalization of payment rules_. III. Concise summary of proposals and summary tables Estate and gift taxes-- Taxation of appreciated property transferred at death or by gift__ Orphan children's deduction--- Unification of gift and estate taxes_. 43 44 44 44 44 Overall effects of reform program--- Summary tables__. IV-C. The Case for and the Dimensions of Tax Reform: Death and Gift 45 46 104 I. Description of present law. 104 Estate tax-- Gift tax--- II. General background....... III. Specific defects in the present transfer tax system__ 104 105 106 107 A. Nontaxation of appreciation of assets transferred at death or B. Tax-free transfers between husband and wife.. A. Taxation of appreciation of assets transferred at death or by 118 VIII-A. Taxation of Appreciation of Assets Transferred at Death or by Gift General explanation.. 331 331 Technical explanation---- 2. Losses VIII-A. Taxation of Appreciation of Assets Transferred at Death or by 1. General manner of operation of proposal. 3. Relation of income tax to estate tax... 4. Exceptions 5. Provisions dealing with liquidity. 6. Treatment of noncapital and hybrid assets. 7. Treatment of lifetime gifts... 8. Future interests.. 9. Effective date__ VIII-B. Unlimited Marital Deduction and Unification of Estate and Gift 340 340 340 341 341 341 347 347 348 349 351 VIII-B. Unlimited Marital Deduction and Unification of Estate and Gift VIII-C. Generation-Skipping Transfers.. Technical explanation-- 1. What is a generation-skipping transfer_-- 388 388 388 389 392 393 393 393 393 393 3. Substitute tax in absence of an election by transferee's parent__ |