One of the federal taxes that troubles many Americans is the estate tax. Of course, no one likes paying taxes, but it's clear the federal estate tax has some serious problems that need to be addressed. First, it imposes a serious burden on many small businesses. Second, it is tremendously complicated, and, finally, the rates are far too high.

Only a very small number of Americans are affected by the estate tax. Currently, to be subject to the federal estate tax the size of the estate must exceed $675,000. In 1997, less than 1.9 % of all the people who died that year paid any estate tax. In addition, under existing law, the estate tax exclusion will rise to $1 million by 2006, which will exempt many more Americans from the estate tax.

The vast bulk of estate taxes are paid by the very wealthy. In 1997, some 2,400 estates - the largest 5% of estates that were of sufficient size to be taxed - paid almost 50% of all estate taxes. These were estates with assets of more than $5 million. Only a small fraction of Americans pay estate taxes, which will raise nearly $30 billion in federal revenues this year.

Although the estate tax affects a relatively small number of people, it raises a number of serious problems, especially for small businesses. We are too familiar with situations in which the owner of a small business dies, leaving the business to the children, only for them to find they have to sell the business in order to pay the estate tax. That is not an acceptable situation.

Concern over the impact of the estate tax led in 1997 to passage of special provisions to remove many small businesses from the estate tax. Those changes, while helpful, did not go far enough. I support further changes to exclude up to $4 million of the value of family-owned businesses and farms from the estate tax.

One change we should make is to expand the amount of estates that is completely exempt from the tax. Instead of gradually increasing the exemption to $1 million by 2006, we should raise the exemption immediately to $1.1 million. To help families who have built equity in their homes, I also support creating a $500,000 estate tax exemption for homes owned five years or more, and simplifying the tax, making it easier and less expensive for families to comply.

In addition to providing relief to small, family-owned businesses, we also need to change the rate structure. At 55%, the top tax rate on estates is much too high. Instead, I have developed a proposal that would permit an immediate 20% reduction in rates, which, along with increasing the amount of the estate tax exemption, would further help small businesses.

We can achieve this immediate rate reduction by repealing a provision allowing states to claim a portion of the estate taxes collected by the federal government. If states want to impose their own taxes on estates, they can do it without having the IRS act as their collection agency. In providing relief for small businesses, though, we must recognize that family businesses and farms account for less than 4% of all assets in taxable estates. We do not need to repeal the estate tax to help those businesses. Instead, we can provide needed relief without causing a serious drain on revenues to the Treasury.

In fact, the bill that recently passed the House, which would repeal the estate tax over a 10 year period, is much too expensive. According to the Joint Committee on Taxation, total repeal of the estate tax would cost $105 billion over the first 10 years, as it is phased in. Once in full effect, though, the repeal would cost more than $50 billion a year. Repeal of the estate tax would cause a revenue loss exceeding half a trillion dollars from 2010 to 2020.

The consequences of such a revenue loss, particularly at a time when the baby boom generation begins to retire in large numbers, could have a devastating impact on Social Security and Medicare. Instead, we should enact targeted estate tax relief to help families and small businesses.