Legacy of the Rich.
Wednesday, May 18th, 2011
Over the past several years I have read and listened to pundits who decrying the demise of the daily newspaper, the weekly magazine, even hard backed novels. Most of the conversation has focused on economics. Declining ad revenues and rising costs have put the squeeze on the fourth estate forcing them to cut back staff and even shutter their doors for good. Moreover, many have claimed that the advent of instantaneous electronic news sources have rendered the traditional daily paper obsolete.
There is some element of truth to all these explanations. However, as tempting as it may be to blame the demise of print media on obsolescence and economic viability, I think there is a deeper systemic problem that is not being addressed.
I’m talking about content.
While newspapers may be under stress from cheaper and faster ways of people getting their news, I feel the daily paper is putting itself out of business, at least in part, for the simple reason that less and less of what finds its way into print these days is worth reading. Not only is much of the reporting two dimensional, the commentary vapid and trite, but increasingly I find it harder and harder to identify just who the newspapers think is their target audience.
Take the following article from the New York Times:
“Wealthy Hesitate to take a Break on Estate Taxes.”
Paul Sullivan
May 13, 2011.
“President Obama and the Republican Congress gave the wealthiest Americans an enormous gift at the end of 2010. They increased the exemption on a series of estate-related taxes and lowered the tax rate on any amount over those limits…. But five months into the tax break, the people able to fully exploit it are more tentative than wealth advisers had expected.”
Who is this article written for? The super rich? If so, the target audience is an awful small slice of the Times readership. To his credit Sullivan tries to make his revelation relevant:
“So why are the richest Americans hesitating to take advantage of this tax break? It comes down to two fears that bedevil everyone: They don’t want to put too much aside now in case they need it later, and they don’t want to take away their children’s incentive to work.”
The first part of this statement is actually grotesque. There are plenty of people in this country with nothing: no home, no savings, no IRA. The thought that there are people out there who actually have 10 million dollars to leave to their progeny is positively repulsive.
Actually, in a way, the first part of this statement is something of a test of a person’s wealth. That is to say, if you worry about how much money you’ll have left after gifting $10 million to your kids, I hate to tell you, but you simply aren’t that rich. The estate tax break for “the wealthiest Americans” is not written for those with ten million or twenty million. It really only applies to people whose net worth vastly exceeds the ten million dollar limit. Ironically, the “savings” realized by eliminating the estate tax on the first ten million is really chump change for the super, super wealthy. For the rest of us, it doesn’t apply at all.
The second part of the rationale presented for why people haven’t made use of the estate tax exemption makes even less sense. Most of my friends have zero savings. Many are living paycheck to paycheck with mortgages, car payments and student loans to pay off. Some are recently unemployed. None of them are worried one whit about how giving ten million to their kids will ruin their work ethic. Most are simply worried about being a burden to their kids in their old age.
Even if you have some assets, the idea of holding out on your kids so they’ll work harder, it is a questionable strategy. While it may appeal to Calvinist “bootstrap” Republicans, the reality is the economic times in which we live markedly different than when baby boomers and their parents came of age, with fewer job prospects and fewer opportunities to “make something of themselves.” In another stunning display of irony, of the few people I know who actually do have ten million dollars in the bank most got their boodle, not by working for it but by… wait for it… receiving an inheritance! The idea that anyone who has received an inheritance should hold out on their children in order to – as one person quoted in Sullivan’s article – “incentivize them” to do well is grotesque in the extreme.
The real issue I have with this article is not Sullivan’s assertion that people are not taking advantage of the estate tax loophole is because they’re worried about what giving too much money will do to their offspring. The real bone I have to pick is that Sullivan completely ignores the possibility why not many people are taking advantage of the loophole is that there simply aren’t that many people who truly fall into the category of the “wealthiest Americans.” According to a paper by by G. William Domhoff of the University of California,:
According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000).
Thus it is conceivably possible that the reason not many wealthy people are taking advantage of the loophole is that there simply aren’t that many super wealthy people in America these days.
For many reasons, lousy scholarship and research, lazy quoting and pathetically bad writing the Sullivan article is bad reporting. But what makes it worse is that the number of people who benefit at all from the tax loophole the author is writing about is so vanishingly small that the article’s usefulness to the readers whom the New York Times is marketing the paper is questionable at best.
If papers like the New York Times truly wanted to stay relevant and economically viable, perhaps they should stop writing articles aimed at phantom “wealthy Americans” who no longer exist. If Paul Sullivan is truly concerned with what his legacy will do to his kids, perhaps he should concentrate on writing articles about carbon emissions, climate change, and pollution.
That’s the real legacy of the rich.
