Whoopi Goldberg is Wrong and Greedy
This morning’s Wall St. Journal features an editorial praising Whoopi Goldberg’s rant against the estate tax on a recent episode of “The View.”
From this we establish a few things:
- "The View" is not a good venue for discussing tax policy;
- Whoopi doesn’t get this and is spreading destructive misinformation.
First, let’s correct some of Whoopi’s blunders.
She asserts that “anyone who wants to leave something to their kid” must pay the tax. Wrong. Only a tiny fraction—less that one-half of one percent—of the people who die this year will owe any estate tax, and that share falls further in 2009, to one-third of one percent.
That's because there is a large exemption in play here. It’s currently set at $2 million and it’s set to go up to $3.5 million in 2009. Granted, the Whoopster is surely in that rarified bracket, but the rest of us are not.
In 2011, thanks to the illogic of the Bush tax cuts, the exemption resets at a much lower level (leading some to call this the “throw your rich mama from the train in December 2010” provision).
Whoopi also asserts that the estate tax amounts to double taxation. But what’s typically being taxed here—and a key rationale for the estate tax—is wealth that has heretofore escaped taxation. Once you get up past those multi-million dollar exemption levels, much of what you’re taxing is “unrealized capital gains,” i.e., assets like property, stocks, the occasional Picasso lying around the Goldberg’s rec room. Since these assets have never been sold or transferred, absent an inheritance tax, their appreciated value escapes taxation.
I’m not asking rich media stars to become expert in this stuff, but those who purport to be speaking for the people should know better. There is, of course, a deep-pocketed movement to repeal the estate tax—they call it the “death tax,” as did Whoopi—and her nonsense really floats their boat. I’m sure that’s why the WSJ editorial page picked this up. “Hey, if good, old Whoopi opposes the death tax, you should too.”
But to repeal the estate tax would leave a one trillion dollar hole in the federal budget in the decade following its repeal. Where are we going to make this up, Whoopi?
You’ve got two choices: cut spending, which disadvantages folks who need the government services, folks whose estates tend not to be in the millions, or raise taxes elsewhere. Since “elsewhere” in this case means non-investment income, we’re going to have to raise taxes on wage earners to give a tax whopping tax cut to Whoopi and Paris H.
I was very much struck by this analysis of Whoopi’s position. Economist Diane Lim Rogers points out that while the so-called death tax hardly hits anybody, the “birth tax”—the debt burden on those who will ultimately have to clean up the fiscal mess caused by repeal—will hit everyone.
Finally, though it’s hard for me to say it: Whoopi, if you’re reading this, there is no more you and me. If you’re going to go off like this, I can’t run with you anymore.
Comments (30)
It is really sad to see the very individuals who (as another star, Bill Maher, points out) have benefitted the most from our society (financially) don't feel the moral need to give some share of their superwealth back.
Note that MANY wealthy individuals, with estates over $3 million, support the idea of a substantial estate tax. If this becomes eviscerated, the perhaps what we need (or should have anyway) is a "mega-wealth" tax, which would be some small %, maybe a fraction of one per cent per year, on all wealth that an individuals has over $3 million. And we could use the money to finance a single-payer healthcare system instead of the partial measures that appear to be politically inevitable.
We also need BADLY to INVEST in eco-industrialization!
December 10, 2007 1:00 PM | Reply | Permalink
Of course, she ignores a major estate tax policy that works in favor of her heirs, and depends on the estate tax...
When you inherit something with unrealized capital gains, you get to reset your cost basis. So Jared Bernstein buys a stock at $1 and it goes up to $90 he owes 15% of $81 when he sells the stock. But if he doesn't sell it, but instead kindly puts me in his will and I push him in front of a bus, I get the $90 but no longer at $1 cost basis. My basis is $90.
Now, if it's big I might indeed have to pay an estate tax when I get Bernstein's estate. But I still get that change in cost basis after that. The change in basis is worth way more to me than not paying the estate tax.
So it's not like wealthy heirs are badly treated.
Jared, thanks for putting me in your will.
thosethingswesay.blogspot.com
December 10, 2007 1:41 PM | Reply | Permalink
Good points, all...except the part about the bus!
December 10, 2007 5:25 PM | Reply | Permalink
Guys; I need a seminar, here!
I thought most estate tax repeal proposals recognize that the "stepped-up basis" loophole will be terminated -- that an inheritance would be treated as a gift is, today.*
Am I wrong?
* Under estate tax law the basis of assets acquired from a decedent is established at ("stepped up" to) the taxable value (value at date of death or 6 months thereafter). Gifts made before death (except the annual exemption?) retain the donor's basis in the hands of the donee.
December 10, 2007 5:43 PM | Reply | Permalink
Ellen,
Under the Bush 2010 repeal, the stepped up basis rule is eliminated, meaning much more liability for those inheriting cap gains (because they can't reset the basis to the higher level).
My understanding is that most reform plans maintain this rule.
December 10, 2007 10:29 PM | Reply | Permalink
I agree with everything said here. But another point that progressives need to start making about this issue (perhaps this falls under political optics or framing) is that abolishing the "death tax" is nothing more than a ploy by the superrich to give their little darlings an even bigger head start in life than the kids born to working and middle class families. The very idea gives the lie to conservative claims about favoring equal opportunity but no special preferences (as in of course affirmative action).
December 10, 2007 2:33 PM | Reply | Permalink
Yup, this whole discussion sounds much like this:
Lots of free money for the people chose their parents so wisely.
I wonder why people who are so free with unearned income for good-parent-choosers have such a problem with bootstrapping such as affordable college tuition et cetera for those who didn't make out as well in the parental lottery?
I recall a judge in a position of supreme legal authority complaining recently about his non-valued Yale Law degree some years ago. It seems there were questions about being an affirmative action entry.
I don't hear nearly as much about the soft prejudice of affirmative action for the children of the wealthy! Just think of all the Harvard MBA degrees that weren't really respected because they were earned by scions of the rich and powerful!
December 10, 2007 9:30 PM | Reply | Permalink
I"m glad to see that knowledge of who is behind the repeal of the estate tax is starting to become more widely known. This report details exactly who the "super wealthy" are and how they have funded the estate tax repeal effort.
You will find the same names behind many other programs from the Cato Institute to Hover, Heritage and even the economics dept at George Mason University. Liberals don't seem to believe that a hundred or so families could really have such a profound effect on public policy, but it's true.
Estate Tax Report (PDF)
--- Policies not Politics
Daily Landscape
December 10, 2007 2:45 PM | Reply | Permalink
This liberal has no problems believing it.
December 10, 2007 3:26 PM | Reply | Permalink
I like Whoopi, I really do. But the whole idea of replacing someone with the real journalistic chops of Merideth Viera with Whoopi Goldberg or, God help us all, Rosie O'Donnell is just plain stupid. It was Viera's level head and comparative gravitas that gave The View an anchor. I don't know if Barbara Walters is even aware that the show has drastically changed since Viera left, but I certainly can see it. I hadn't thought about it til just now, but you know who would be perfect? Thalia Assuras of CBS.
December 10, 2007 3:16 PM | Reply | Permalink
I've never seen this show, but my sense is that a lot of people get their info from it. So when the discuss stuff like this, you'd love to see someone in the mix who knows what they're talking about.
December 10, 2007 5:27 PM | Reply | Permalink
"But the whole idea of replacing someone with the real journalistic chops of Merideth Viera with Whoopi Goldberg or, God help us all, Rosie O'Donnell is just plain stupid." Actually, I hadn't even heard of these instances, and the one that's grating on me is how much I'm reading in the tabloids here (and, to a lesser extent, the broadsheets) on Oprah's push for Obama. It's enough to make me vote for whoever Judge Judy is supporting.
John
http://www.haberarts.com/
December 10, 2007 6:08 PM | Reply | Permalink
That is disappointing. She's always struck me as smart and very humane.
Would it be unkind to point out that Ms Goldberg supported herself and her daughter with welfare checks for a number of years?
Sometimes I think this attitude ("I'm aboard, pull up the gangplank!") is worse than the Bushes and the Hiltons who at least have the excuse that they were literally bred to be oblivious to their own privilege.
December 10, 2007 3:25 PM | Reply | Permalink
Sorry, I must disagree with the thread to some extent. The estate tax problem is and always has been that it is set at absurdly high levels that strike people as confiscatory. I am one of those people. If it was set at levels less than 50% plus state taxes (obviously once you cross the exemption threshold) it would be more palatable and subject to less criticism. There are too many examples that I know of of parents that were desperately trying to avoid the conundrum of passing on, after taxes, nothing more than non liquid assets with high costs to maintain. I do not favor abolishing the tax at all, but I do favor reducing the rates and providing an exemption for, e.g., the first $3-5 million.
December 10, 2007 3:51 PM | Reply | Permalink
I have no problem with reducing it for the levels you suggest, and a 50% tax on anything bothers me, too.
But the issue here, to me, is that Goldberg was presenting this as "anyone who wants to leave something to their kids", which is fundamentally dishonest.
(also, I don't know how much revenue is generated by the inheritance tax, but we've got a huge national debt that grows by a billion a week in Iraq (I believe?), plus interest. If we're going to cut any tax, we have to consider those consequences as well).
December 10, 2007 3:57 PM | Reply | Permalink
I see nothing wrong with high tax rates for this windfall for rich kids. As far as exemptions go, there is such an exemption - the first $3 million or so isn't taxed. Inheritance taxes are one good way to slow the wealth accumulation by the wealthy, so it has to be a good idea.
Hoppy in Sacramento
December 10, 2007 4:09 PM | Reply | Permalink
right. i have no problem with significant downwardly redistributive taxes when income and wealth disparities in this country are so appalling as to be fundamentally immoral. (and i'm someone who likes to disparage others for being 'pinko bolsheviks'...)
December 10, 2007 7:57 PM | Reply | Permalink
The marginal rate has been quite high on this tax--now at 45%. But because of the high exempion levels and the deductions for charity and state taxes, the effective rate (the amount people pay as a share of their estates) is below 20%.
Also, many in the 'reform it, don't repeal it' camp, want to keep the 2009 rules ($3.5 mil exemption and 45% rate). Note that that still loses about 45% of current revenue from the tax, which you've got to make up elsewhere.
December 10, 2007 5:33 PM | Reply | Permalink
Yeah, that was just an astonishingly stupid thing for her to say (I wrote about it last week). Very disappointing, because she has been on the good side of a lot of issues.
December 10, 2007 4:17 PM | Reply | Permalink
The estate tax debate has gone beyond annoying to making me see red. Doesn't a substantial tax encourage establishing trusts? And don't those encourage stable long-term investment?
Do the wealthy really want their Parises and Jennas to blow the wad as fast as possible? These folks are just crazy. They should be forcing their children to do without inheritance until a much later age, like 50. They can set up a safety-net trust.
I suspect another agenda. The debate makes no sense.
December 10, 2007 4:53 PM | Reply | Permalink
Jared you were great on CNBC. One request whenever someone uses the "death tax" would you use the legal term?
One noneconomic point, would we want people like Steve Forbes who inherited his wealth put it in securities on which he would pay 15% on the income and nothing on the gain and pass it on to his children taxfree with more and more wealth amassed in fewer and fewer hands.
Daniel A. Greenbaum
December 10, 2007 6:06 PM | Reply | Permalink
Thanks Daniel, and yes, I will make a point of not allowing folks to get away with the 'death tax' label. I like the rhetoric of arguing that estate tax repeal leads to a massive 'birth tax.'
December 11, 2007 6:33 AM | Reply | Permalink
Great post, and since the previous commenters have made all the salient points, let me just add an analogy.
My mother (a Republican) called me one night a year or so ago wanting to talk politics. She rarely does this, as she never reads newspapers or watches the news, which allows me to soundly defeat even her most sound arguments.
Anyway, the estate tax had been in the news, and she told me that I should oppose the tax because it would hurt my inheritance.
After about 30 seconds, she asked why I was laughing so hard. Now, my mom and stepdad are far from poor, but they could cash in everything they own and would be lucky to put togethers $300,000.
My point is, many people believe, some lower-income but especially in the upper-middle bracket, that everyone owes an estate tax upon death.
So thanks, Jared and commenters, for pushing the truth on this issue.
P.S. I thought Whoopi was a Democrat. Doesn't she realize that "double taxation" is the right-wing talking point not only for the estate tax but for the income tax, capital gains tax, etc??
December 10, 2007 7:10 PM | Reply | Permalink
that's why it's an effective talking point: it sounds unfair (if you don't know anything about tax policy).
December 10, 2007 8:10 PM | Reply | Permalink
I found out the hard way that any inheritance is taxable if it was accumulated without income tax being paid on it. A few years ago my last surviving aunt died and left her assets to be divided among all of her nephews and nieces. That was done, and I got a nice unexpected gift from it. I checked the income tax rules and found, as I expected, that inheritances were not taxable up to $2 million or some such figure. Since I got far less than 1% of that, I didn't report it as income.
Two years later the IRS caught up with me and fined me for not paying the tax. This time I did more research and finally found that if the legacy was originally built from US Savings Bonds, the inheritors had to treat it as income. It wasn't a big inheritance and it was a small fine, so that didn't bother me a lot, but finding out that inheritances for little people can actually be taxed did bother me.
Hoppy in Sacramento
December 10, 2007 8:32 PM | Reply | Permalink
Interesting.
Did you receive cash or the bonds themselves? directly from your aunt's estate? or by virtue of something like a POD ("pay-on-death") clause on the face of the bond itself?
Assuming you got the bonds themselves, did you have to pay income tax before you cashed them? Did you pay a tax on the entire value of the bonds (principal and accumulated interest) or only on the accumulated interest which -- as tax deferred, tax preference instruments -- had never been previously taxed?
Was it the Income Tax Section or the Estate & Gift Tax Section that fined you?
N.B. No matter how small a decedent's estate is, it will be charged with usual income taxes for untaxed income (year of death earnings, for example, or income earned after death). Income taxes and estate taxes are completely separate taxes. The two IRS sections hardly ever talk to each other.
December 10, 2007 9:12 PM | Reply | Permalink
My case involved CD's which apparently were roll over investments of US savings bonds. And, the estate lawyer made the decision not to pay the income taxes before distributing the inheritances. Probably that was the right decision, since the total of all of the CD's would have possibly been enough to move up to a higher tax bracket, leaving less to distribute.
Tax laws are a confused mess once you move away from simple income tax forms. So, I can see why everyone seems to believe the "death" tax will wipe out their own estates.
Hoppy in Sacramento
December 12, 2007 9:50 PM | Reply | Permalink
I don't know for certain that it couldn't be done but can't imagine how one would go about "rolling over" savings bonds into CDs.
I f your aunt or even her executor cashed the bonds and bought CDs with the proceeds, the obligation to pay the income tax on the untaxed Savings Bond interest would have been the executor's. How did you wind up having to pay it?
December 12, 2007 9:57 PM | Reply | Permalink
This wasn't an estate tax, but a simple income tax. The estate of your aunt should have paid the tax in the year she died since the bonds were then cashed out. The same is true of all tax deferred accounts like IRA's.
Deferred instruments, are just that, deferred, not exempt. If she had cashed in bonds while she was alive she would have paid the tax on the income herself.
The advantages of deferred accounts is that they can compound tax free and that, presumably, one will be in a lower bracket after retirement and thus pay less tax than one would have paid at the time the money was first earned.
I'm sure there are calculations on how much annual revenue the treasury is losing from all these deferred accounts. The mixed situation is a patchwork attempt to compensate for the disappearance of defined benefit retirement plans.
--- Policies not Politics
Daily Landscape
December 11, 2007 6:11 AM | Reply | Permalink
The blunt tuth here is that the estate tax is really a concern only to those that stand to inherit 5 million and up and, the further up from that point they are, the more concerned they are.
This debate, and the highly paid, highly skilled, communications people framing it, are being funded by some of the most affluent families in the US, led by the (Walmart) Waltons. For them, billions of dollars are at stake. Spending a mere 100 million on a public relations campaign is chicken feed.
And who is once again in the middle of a national debate that benefits only the chosen few?
Grover Norquist, that's who. Pay him enough and he will figure out a way to make your issue something that All Right-Thinking Americans can agree upon. Just ask the guys who run sweatshops in the Marinas Islands and hired Jack Abramoff. Jack knew where to throw the money.
At Grover Norquist, that's where. Somehow Norquist avoided indictment over the whole Abbramoff thing, but it was clear that his focus was for sale. He made the Marianas Islands sound like a free-market paradise where the workers lived a life that was the envy of islanders throughout the Pacific. Federal work standards would only get in the way of this workers' Garden Of Eden.
Of course it was really a workers' Hell On Earth with people held in virtual slavery. The owners of the factories paid Norquist (through Abramoff) and he figured out a way to make it a Conservative Cause. So why do you suppose that Grover Norquist is now pushing the whole "death tax" issue?
Because they paid Grover Norquist, that's why.
December 11, 2007 6:17 PM | Reply | Permalink