Testimony of

Neil E. Harl

Charles F. Curtiss Distinguished Professor in Agriculture
and Professor of Economics

Iowa State University
Ames, Iowa

before the

Senate Committee on Agriculture, Nutrition, & Forestry
United States Senate

Washington, D.C.

February 26, 1997

Mr. Chairman, Members of the Committee, ladies and gentlemen. I am pleased to appear today before the Committee to provide commentary on several tax issues-(1) proposals to reduce the federal income tax rate on long-term capital gains; (2) proposals to amend the transfer tax system (federal estate tax and federal gift tax); (3) comments on deficit reduction; and (4) some concluding observations.

I. CAPITAL GAINS

The Tax Reform Act of 1986 eliminated the 60 percent exclusion for long term capital gains effective for taxable years after 1986. In 1990, the Congress restored a limited tax break for capital gains in the hands of higher income individuals by imposing a 28 percent maximum rate on long-term capital gains income.

Proposals pending in Congress would create varying degrees of preferential treatment for long-term capital gains. For several reasons, I believe that enlarging the preferential treatment for long-term capital gains would be a mistake. Such a move would be costly, would distort resource allocation and would perpetuate a major contributor to complexity of the Internal Revenue Code. Moreover, I am highly skeptical that such rate cuts would boost economic growth to the extent claimed by the proponents.

A. Complexity of tax law

Without a doubt, different treatment for long-term capital gains is the single biggest factor contributing to complexity of the Internal Revenue Code. The Code is shot through with provisions for limiting or targeting the benefits from the preferential treatment of long-term capital gains. And it s more than just the Code. A substantial body of regulations and rulings focuses upon distinctions among capital assets, assets used in the trade or business and inventory-type property. Moreover, many, many cases are litigated each year over those distinctions.

Many of us toiling as educators as well as practitioners agree with taxpayers that the system is incredibly complex and should be simplified. Certainly one good place to start would be to strip away all distinctions among classes of assets and treat all income as ordinary income.

The Tax Reform Act of 1986, which was touted as bringing simplicity into the tax system, hardly achieved that objective. Indeed, tax simplification has somehow managed to elude the Congress.

While I believe that one highly important objective of any tax system should be simplicity and I would like nothing better than to leave the next several generations a legacy of tax simplification, I have concluded with some reluctance that the largest and most complex economy in the world would probably not be well served with a simple tax. Yet we are all duty-bound to do all that we can to achieve the highest possible level of tax simplification, to streamline and make more efficient the revenue assessment and collection processes and to be the best possible stewards of the world's scarce resources.

B. Impact on the budget deficit

The evidence is compelling that further reduction in rates for long-term capital gains would be costly for the Treasury. The Joint Committee on Taxation estimates that the more extreme proposals could cost $33.1 billion over the next five years (1997-2002) and nearly $129.3 billion more the next ten years (1997-2007).

In my opinion, this would be a dangerous move. The first principle of any tax system is to generate the funding needed to pay for the services provided by government. It is the responsibility of the Congress and the President to take the long view and to keep fiscal considerations always in mind. If elected members of government fail to respect the "fisc," it is asking a great deal of taxpayers individually and collectively, voluntarily to forego consumption to support a common good.

It is my view now, and was my view then, that the tax cuts of 1981 were a monumental mistake. The Congress rushed to cut taxes in the hope that economic growth would be sufficient to offset the lost revenues. Of course, we all know that growth was not sufficient and the country experienced huge deficits and continues to do so as we speak, although the amount of the budget deficit has been narrowed substantially the past four years.

In September of 1981, I was quoted as saying that the tax cuts of 1981 "were the most irresponsible Congressional act of this century." In 1984, in testimony before the Joint Economic Committee, I indicated that I wanted to reconsider what I had said earlier. When asked how I felt at that point, I said that the tax cuts of 1981 were "the most irresponsible Congressional act in the history of the republic. As a matter of tax policy, nothing now ranks with restoring a sense of fiscal sanity to the economy of this country. A severely and chronically unbalanced budget is a matter of national security."

I would hope that we would remember the experiences of the past decade and a half and take the politically and economically responsible steps of first deciding what government services are to be provided and their cost and then deciding on the level of taxation. To do otherwise is to court disaster.

C. Effect on growth

The advocates of cuts in the tax rates for long-term capital gains argue that the lost revenue would be made up with higher levels of economic growth. Certainly reductions in capital gains rates would increase investment incentives. However, the evidence is less than compelling that the cuts in rates advocated would produce the kind of economic buoyancy projected. The effective rate of income tax on long-term capital gains is already low (some estimate the figure to be about seven percent). That is because taxes on long-term capital gains can be deferred, the gain on such assets is typically forgiven at death and, in any event, rates are capped at 28 percent for individuals. Moreover, a substantial part of capital gains accrue to tax-exempt investors for whom a tax cut would be worthless. In addition, about a third of investment is financed with debt capital rather than equity. Estimates indicate that reducing the maximum rate on long-term capital gains to 14 percent would likely reduce the cost of capital by only a modest amount.

It is well to remember that the economic growth rate in this country has been quite respectable in recent years without the cuts. It is also well to remember that the growth rate is heavily dependent upon policy of the Federal Reserve. Cutting tax rates (and thus increasing the deficit) is not a promising way to assure an easing of Fed policy.

Tax cuts have been viewed for a very long time as a way to spur the economy in times of economic downturn. To cut taxes at a time when the economy is growing and the Federal Reserve is dispensing monetary medicine to limit economic growth and contain inflationary pressures is questionable at best. To justify tax cuts on the grounds that economic growth will be spurred is hardly a new idea. But to do so when economic growth is already constrained by Fed policy is wrongheaded.

D. Tax shelters

One of the important features of tax policy over the past 30 years has been the gradual curbing of tax shelters. If investors could borrow and deduct the interest at rates up to 39.6 percent with the funds invested in assets that generate long-term capital gains which are then taxed at 14 percent, or even less, tax shelter activity would be encouraged. The result is a distortion in resource allocation.

Agriculture has been particularly susceptible to tax-motivated investment because of the availability of the cash method of accounting (even though inventories are a material income determining factor) and the biological nature of the sector as assets are created in the form of animals or crops. Those features have afforded opportunities for investors to deduct costs against other income and, in some instances, to sell the assets at reduced tax rates. Tax shelter activity in the agricultural sector reached a peak in the late 1960s with substantial amounts of investment capital flowing into feedyard activity, much of which was in the Southwest; cow-calf and dairy herds; and tree crops. The extremely generous depreciation allowances, the tax advantages of leasing arrangements and the higher level of investment tax credit in the 1981 tax act also influenced investment activity.

The campaign to curb tax shelter investments began with the imposition of depreciation recapture in 1962 and 1964 and continued with the Tax Reform Act of 1969 which implemented new hobby loss rules; legislation enacted in 1976 which added rules limiting the tax advantages enjoyed by "farming syndicates;" statutory enactments in the early 1980s which imposed "at risk" rules; and the Tax Reform Act of 1986 which contributed additional limits on the deductibility of prepaid expenses, the far-reaching rules on deducting passive losses and the repeal of the 60 percent long term capital gains exclusion.

Most agree that tax breaks or inducements affect investor behavior in encouraging investment to be targeted to areas of greatest tax advantage, thus distorting economic activity. Agriculture has been particularly impacted in a negative manner by tax shelter activity because of inelastic demand for most farm commodities. With inelastic demand, increases in supply are rewarded with a disproportionate drop in price and in profitability. Since 1986, the level of tax induced investment in agriculture has been at the lowest level in modern time.

The various proposals for rate cuts for long-term capital gains should be evaluated in part on the basis of whether the provisions would return the tax system to a higher level of tax shelter activity. It is my belief that lower tax rates for long-term capital gains would have that result.

E. Assets used in the business

The same preferential treatment for long-term capital gains would be available for assets used in the business under the proposals. An example, for which we have some experience, is animals held for draft, dairy and breeding purposes. While this move would be greeted warmly by taxpayers viewing the situation on a micro basis, the result would almost certainly be increased investment in assets eligible for such treatment. Moreover, we know from observing tax behavior in the years before 1987 that taxpayers would be inclined to maximize the benefits of the provision by selling sows, for example, after meeting the holding period requirement (12 months) even though economic and management considerations would suggest keeping sows for more litters.

The greatest impact, however, would be to induce more investment in eligible assets, thus driving up the supply. Taxpayers do respond to economic signals. An example of this occurred in 1978 when farmers lobbied for and obtained an extension of the investment tax credit to single purpose agricultural structures (confinement livestock facilities). It was later conceded, even by the most ardent proponents of the move, that it was an economic mistake for farmers. The outcome was that more facilities were built (the price dropped to 90 percent of cost as the U.S. Government picked up the cost for the other 10 percent) and, once built, were generally kept filled with hogs. Not solely for this reason, but undoubtedly affected thereby, more than half of the months from 1981 to 1985 were loss months in hog production.

Preferential treatment for capital assets and assets used in the business distorts resource allocation.

F. Land

A major argument for restoring a capital gains tax break is to encourage older individuals to sell their assets. It is true that an historically disproportionate amount of farmland ownership, for example, now rests with older landowners.

One of the legacies of the farm debt crisis of the 1980s has been an increase in concentration of land ownership by older individuals. In 1992, half of Iowa farmland owned by noncorporate owners was owned by individuals 61 years of age or older. This is compared with half of Iowa farmland owned by individuals age 56 and older in 1992.

The 1992 study showed that 49.3 percent of the landowners anticipate disposing of their land by will, another 14.4 percent plan to put their land in trust and only 17.3 percent expect to sell their land. However, implementing a lower income tax rate for long-term capital gains is unlikely to "unlock" assets. So long as a new income tax basis is obtained by retaining land ownership until death, many individuals are unlikely to change their plans even if the effective maximum rate of 28 percent drops to 14 percent or even lower.

Moreover, the"lock in" effect is probably substantially overstated for other taxpayers. The lock-in effect is the most serious when a shift to a more productive use of the resource is blocked. It is difficult to make a compelling case on that basis for corporate stock or, for that matter, for much of the investment in land. Assets tend to gravitate into their highest and best use because of basic economic pressures in any event.

G. Equity considerations

The distributional impact of a cut in the income tax rates on long-term capital gains would be substantial. Much of the benefit would accrue to households in the top five percent of the income distribution.

H. Long-term considerations

Fundamentally, an important question for this Committee is whether the economic health of the country is likely to be enhanced with tax breaks related to real capital assets. Certainly that has been the traditional approach to spurring economic activity in times of recession.

But a good case can be made that the competitive position of the United States in the next half century will relate more to the productivity of its human capital than to productivity of its capital base in the form of real assets. It is my view that the focus as we move forward into the twenty-first century should be on encouraging a higher level of development of human resources at all levels and in encouraging the development of a climate for innovation and entrepreneurship rather than persisting with what I consider to be an outmoded concept of providing breaks for capital investment in real assets. Focusing attention on tax breaks for capital assets is an idea whose time has passed.

II. ESTATE AND GIFT TAX REFORM

Various proposals would increase the federal estate and gift tax unified credit from the current level of $192,800 (equivalent to a deduction of $600,000) to a level of $248,300 (equivalent to a deduction of $750,000) or higher. That move would constitute a tax break amounting to $55,500 for the heirs of the wealthiest property owners in the country if the credit were increased to $750,000. Proposals to repeal the federal estate tax would amount to a tax break of just under $5 million for someone with a taxable estate of $10,000,000. The critical issues are- (1) the impact of the proposals on farms and small businesses, (2) the effect on revenue and (3) the long-term effect on concentration of wealth.

The system of transfer taxes exists for two reasons- (1) to generate revenue and (2) to curb, to a modest degree, the concentration of wealth. The revenue from estate and gift tax is not insignificant. But the wealth concentration problem deserves examination. Although it is not perhaps politically correct today to dredge up that topic, it is my view that in the decades to come one of the great problems in this country will be the growing disparity in wealth position between the haves and the have-nots. The modest effort, in place since 1916, to tax the most wealthy asset holders at death seems appropriate.

A. Impact on farms and small businesses

The need to "save" farms, ranches and other small businesses is a frequently cited justification for an increase in the federal estate and gift tax unified credit. This argument seems to have been uncritically accepted at face value. More reflective consideration suggests that the increase would miss most of the alleged target group. More importantly, it may well have a counterproductive effect by further concentrating the ownership of land and exacerbating the already seriously unbalanced federal budget.

The popular belief is that family farms are handed down from generation to generation like some sort of heirloom. That is rarely the case. In most instances, family farm businesses are born and die within a lifetime. The land may remain in the family. But the farm business ends with the retirement or death of the sole proprietor. And more than 80 percent of the farms are operated as sole proprietorships. Typically, they last a lifetime and cease to exist when the farmer retires or dies. In the usual case of two or three surviving children, only one of them will be in farming. But that one will typically be aged 50 years or more at the deaths of the parents and would be looking to retrenchment and disposition of farming assets rather than acquisition and expansion. if this is the typical case, the land will remain in the family- in part because of other strong incentives in tax law for it to remain in the family but the family of the decedent parents will not be farming it.

If one of the children takes on the farm, a reduction in the estate tax burden will be shared with those who are no longer farming and usually live some distance off the farm. The cost of giving lower estate taxes to the farming children comes at the price of giving the same tax reduction to those who no longer have any connection with the farm.

Finally, as already noted, even when there is a child who wants to retain the farm, the child will not be a young enterprising farmer on the rise -one who typically has great need for capital to expand an operation that may be struggling. Rather, the farming child is much more likely to be one ready to slow down, and who will find that receipt of the family farm will likely complicate and increase the need for tax planning that the child will already have begun. The tax reduction thus does nothing to help those most in need of help and imposes additional planning burdens on those without great capital needs.

The proportion of farms that are trying to defy the family farm cycle and to survive into the next generation and succeeding generations as going farm businesses is growing but is still a small percentage of the total. A good case can be made for a modest increase in the unified estate and gift tax credit (and adjusting the credit for inflation) and for easing the burden of paying the federal estate tax where a farm or other small business is involved and the owners are pursuing an objective of continuation of the business into the next generation.

B. Land values down from peak levels

Another important fact has been lost in the debate. The existing estate tax law now allows a great deal more farmland to be passed tax free to heirs than it did when present tax free levels were set in the early 1980s. Nationally, farmland values declined by nearly 35 percent in the 1980s with some states registering drops of nearly twice that level. In Iowa, for example, farmland values declined by 63 percent between 1981 and 1986. Since 1986, land values in many states have not recovered the losses in the 1980s. As of December 1996, average Iowa farmland values stood at $1682, still well below the peak of $2,147 in average value in 1981.

Even without considering special use valuation, discussed below, the $600,000 tax-free level set in 1981 would have, when fully effective, protected about 280 acres at 1981 prices from the estate tax. Today, that same tax-free level would protect more than 350 acres of Iowa farmland.

With the cutbacks envisioned in government spending over the next several years, farmland values are not expected to rise dramatically. Indeed, reductions in federal funding are expected to act as a damper on valuation increases.

C. Special breaks available

Since 1977, farmland (and other land used in a business) has been eligible for a special valuation procedure for federal estate tax purposes. That procedure, referred to as "special use valuation," can reduce the federal estate tax gross estate by as much as $750,000. Although few achieve that level of savings, special use valuation typically produces values ranging from 40 to 70 percent of fair market value of farmland depending upon the region and the year of death.

Under the most advantageous valuation formula for special use valuation, the average annual gross cash rent for comparable land in the locality for the last five years (minus property taxes on comparable land) is divided by the average federal land bank interest rate for new loans on land in the district where the land is located.

As an example, assume a 640-acre farm in Iowa is owned by a farmer and spouse. The farmer died in 1996. Assume the average annual cash rental on comparable land in the locality for the last five years is $120 per acre, the average per acre real property taxes for the past five years we'll assume are $20 per acre. The valuation formula becomes--

V = 120-20/.0838
    = 1,193

The special use valuation would be $1193 per acre (using the Omaha Federal land Bank District five-year interest rate of 8.38 percent).

Land that would have produced cash rentals of $120 average for the five-year period of 1991-1995 would likely sell for $1,800 to $2,200 per acre. Thus, the special use value would fall, in this example, somewhere between 54 and 66 percent of fair market value. For land near major cities, the discount is even greater.

Just what this means can be shown by an example assuming valuation of land at the midpoint of the range set out above, $2,000 per acre. Assuming our hypothetical farm of 640 acres, nearly twice the size of the average farm in the Middle West, if a couple managed to save an additional $200,000 and owned the farm as tenants in common free and clear of debt, the value of their assets would be $1,480,000. Assuming that they do minimal planning and also qualified for the special use valuation of $1,193 per acre, each would have an estate of only $481,760, well below $600,000, the present level exempted by the unified credit. They can hand down to their heirs more than $1.5 million without any estate tax at all.

The policy represented by this example is the result of nearly 20 years of easing estate tax burdens on farms and small businesses. It has been effective. More than 95 percent of farms can be transferred to heirs without any estate tax at all under the existing unified credit.

Even if federal estate tax were due on an estate in the above example, the amount of the tax (up to $153,000) attributable to a business should be eligible for installment payment at 4 percent interest over nearly 15 years after death. The installment payment provision is available with minimal planning. Over the 177-month installment payment period, if a firm would otherwise be paying 10 percent interest on its borrowed funds, a firm borrowing from the government at 4 percent interest would save more than enough to pay the original tax bill.

Mention should also be made of reductions from fair market value for federal estate tax purposes in the form of discounts fo-- (1) co-ownership of assets (up to 20 percent) and (2) discounts for minority interest and non-marketability (30 to 35 percent) of interests in corporations and even, in some instances, partnerships.

D. Double Taxation?

The point is sometimes made that transfer taxes, notably death taxes, are not needed as part of a tax system because the wealth involved has already been subjected to income taxation. While that is the case with some property, there are vast amounts of asset value that represent appreciation in value and have not been subject to income taxation. Stock market gains and investments in real estate are prominent among the assets with substantial amounts of potential gain.

If the federal estate and gift tax system were repealed, and the adjustment in basis at death to fair market value were to be left in place, as many anticipate, vast amounts of asset value would escape taxation altogether.

E. Revenue implications

The impact on revenue from the proposed reductions in federal estate tax burden would be substantial. An increase in the unified estate and gift tax credit from the present level (exemption equivalent of $600,000) to $1 million (with the level increasing by $50,000 per year) would cost $10.2 billion in revenue for the period 1997-2002 and $40.1 billion for the period 1997-2007. Enactment of the family-owned business exclusion would cost $8.3 billion for the period 1997-2002 and $26 billion for the period 1997-2007. Proposed modifications in installment payment of federal estate tax would have modest revenue implications.

F. The broader picture

U.S. agriculture learned an important lesson as a result of the farm debt crisis of the 1980s. An extremely high price is paid for an unstable fiscal policy as well as an unstable monetary policy. Tax cuts are always attractive when viewed with a micro perspective. Viewed in the aggregate, from a macro point of view, tax cuts are often viewed far less favorably. If the result is a larger budget deficit and higher interest rates, everyone pays a price for the reduction in revenue. Moreover, if the benefits fall to the largest farmers and the largest landowners, which is most assuredly the case here, the move would accelerate the trend toward greater concentration of wealth and even greater pressure for farm consolidation. Encouraging larger farms to expand even more may not be good public policy, particularly when the expansion is likely to be at the expense of smaller family owned operations.

An increase in the unified estate and gift tax credit would benefit fewer than the top five percent of estate owners. To justify the increase on the basis that it is necessary to "save" the family farm is misguided. Those pressuring for an increase in the unified estate and gift tax credit appear to be using the politically appealing message that family farms will otherwise be broken up. That is far from the truth. Family farms are more at risk from persistent deficits than from federal estate tax liability. The beneficiaries of an increase in the unified federal estate and gift tax credit would be the richest property owners in the country, further exacerbating the clear and worrisome trend toward greater concentration of wealth.

G. Suggestions

If the desire is to benefit farms and small businesses, a targeted approach to business continuation makes more sense than benefiting investors in all sectors. Making installment payments of federal estate tax more attractive is one such targeted approach. While the four percent rate of interest on unpaid federal estate tax under the provision currently available (allowing payment over 14 years and 9 months after death) is generous, reducing the rate further for small businesses, extending the payment period and enlarging the amount deferrable up to a reasonable level would seem to be a good response to pleas for relief and still be faithful to objectives of containing revenue loss for budget-balancing reasons and continuing a modest effort to limit concentration of wealth. Clarifying whether heirs could mortgage property in the 177-month period after death and exempting dispositions of property in the ordinary course of business from the rule accelerating the unpaid tax are other examples of the types of changes that would enhance the usefulness of the provision. Only small businesses would benefit from that type of change. A phased increase of the unified estate and gift tax credit to $750,000 over six years could be justified on the grounds of catching up with inflation since 1987. In contrast, repeal of the federal estate and gift tax would amount to a substantial windfall for the estates of the wealthiest property owners in the country, including many with only an investor's connection with a business, if that.

III. ANTIGOVERNMENT RHETORIC

One of the more disturbing aspects of the current debate on tax policy is the decidedly anti government tone to the discussion. While I know that we all become frustrated with government from time to time, it is important to remember that "government" is us. More importantly, though, I fear that we lack an appreciation for the role government plays in our lives.

My perspective on government has changed a great deal in the past few years. Commencing in 1990, our Center for International Agricultural Finance at Iowa State University, which I direct, has conducted 40 schools in commercial banking, bank supervision and regulation, international banking and bankruptcy for more than 1,200 participants from the 23 states of the former Eastern Bloc that are transitioning to a market economy. In addition, we have sponsored or co-sponsored two international conferences on new legislation needed, carried out three task force efforts on problems of excessive debt and bankruptcy in the Czech Republic and Slovakia, participated in two major conferences on privatization and consulted with the government of Ukraine on land privatization.

What is striking in all of this is that individuals from those countries are bright, well educated and work diligently and conscientiously. Their soils and climate are nearly as favorable as ours. Their mineral endowment is probably greater than ours. Certainly their timber resources are greater.

And yet their gross national product is a pitiful fraction of ours. The difference, everyone knows, is not so much the people or the resources. The difference is the system. So before we turn on our government in frustration and anger, we should consider that our system of governance and economic organization has brought unprecedented and unparalleled prosperity to this country. Let us ponder that fact very carefully before we go charging off in a new direction with some grand experiment in taxation or in governance.

Pub. L. No. 99-514, Sec. 301(a), 100 Stat. 2216 (1986). Pub. L. No. 101-508, Sec. 11101(c), 104 Stat. 1388-1 (1990). See Joint Committee on Taxation, Description of S.2 ( American Family Tax Relief Act ), January 21, 1997. The estimates assume enactment of (a) a 50 percent deduction for individuals, 2-for-1 loss offset; (b) collectibles taxed at a 28 percent maximum rate; (c) present law section 1250 recapture; (d) allow deduction for individual AMT; (e) indexing starting in 1997 for individuals with 1/1/97 mark-to-market option, with three year post 1996 holding period required; (f) small business stock taxed at a 14 percent maximum rate for individuals and a reduced corporate rate; and (g) a 28 percent maximum rate for corporations. The estimates are revenue loss of $25.3 billion for individuals and $7.8 billion for corporations from 1997-2002. From 1997-2007, the estimated revenue loss would be $112.4 billion for individuals and $16.9 billion for corporations. Des Moines Register, September 29, 1981, pp. 1A, 4A. N. Harl Statement Presented to the Joint Economic Committee, U.S. Congress, S. Hrg. 98-1049, May 10, 1984. See, e.g., I.R.C. ñ 453. I.R.C. ñ 1014(a). I.R.C. ñ 1(h). I.R.C. ñ 1231. I.R.C. ñ 1231(b). I.R.C. ñ 1231(b)(3)(B). See Schultz, Ann M. and Neil E. Harl, "Iowa Farmland Ownership and Tenure 1982-1992: Analysis and Comparison," Iowa State University, 1995. Much of this section is drawn from Neil E. Harl, Does Farm and Ranch Property Need a Federal Estate and Gift Tax Break? Tax Notes, August 14, 1995, p. 875. At the time of enactment in 1916, the federal estate tax exempted from tax the first $50,000 of property. 39 Stat. 777, 778 (1916). The rates above the exception were one to ten percent (for net estates exceeding $5 million). 39 Stat. 777. See 5 Harl, Agricultural Law ñ 41.02 (1996). Census of Agriculture, 1992, vol. 1, Table 47, p. 63 (of the 1,927,073 farms, 1,653,491 are sole proprietorships). E.g., Estate of Cervin, T.C. Memo. 1994-550, appeal docketed, 5th Cir., Aug. 31, 1995. See 8 Harl, Agricultural Law ñ 58.05[2][c](1996). I.R.C. ñ 1014(a). Joint Committee on Taxation, Description of S.2 ( American Family Tax Relief Act ), p. 23, January 21, 1997. Id. Id. I.R.C. ñ 6166. See Harl, Perspectives on Tax Policy, Tax Notes, September 11, 1995. 1