The Morning: Death and taxes

Plus, a manhunt in New York, Pete Hegseth and albums of the year.

View in browser|nytimes.com December 5, 2024 Good morning. Today, my colleague Jesse Drucker explains why the estate tax isn't working. We're also covering a manhunt in New York, Pete Hegseth and albums of the year. —David Leonhardt Photo Illustration by Blake Cale; Photographs by Philip Cheung for The New York Times; Haiyun Jiang for The New York Times; Carly Zavala for The New York Times; Jim Wilson, via The New York Times A broken system By Jesse Drucker I'm an investigative reporter. The federal estate tax — which is imposed on a tiny sliver of rich Americans when they die — is being eviscerated. In theory, the tax is simple. A married couple can pass along about $27 million (say in cash or stock) to their heirs tax-free. Anything above that is supposed to be taxed at a rate of 40 percent. But although the wealth of the richest Americans has soared over the past several decades, estate tax receipts have not. Sources: Internal Revenue Service; Federal Reserve | By The New York Times To understand what that means, consider this: Revenue from the estate tax has barely changed since 2000, even as the wealth of the richest Americans has roughly quadrupled. If the tax had simply kept pace, it would have raised around $120 billion last year. Instead, it brought in about a quarter of that. That shortfall would be enough to triple federal research funding for both cancer and Alzheimer's — and still leave enough to double the entire budget of the Justice Department. There are several reasons the tax isn't working. In today's newsletter, I'll explain three important ones. Anti-tax warriors The tax has been getting weaker since the 1990s, when a few things happened. For one, a handful of billionaires, including the Kochs, Waltons and Mars families, funded a lobbying campaign to kill the estate tax. It culminated when George W. Bush signed a law that gradually cut the top rate to 45 percent, down from 55 percent, and gradually raised the size of the fortune that could be exempt. The amount excluded doubled in the 2017 Republican tax overhaul signed by Donald Trump. Now, a married couple can pass down $27.2 million to their heirs without paying a dime of estate tax. Many of these provisions end next year, but Republicans seem likely to expand them. The incoming Senate majority leader, John Thune, has sought to abolish the estate tax for nearly three decades in Congress. When he jumped from the House to the Senate in 2004, he unseated the Democrats' leader in part by running against the "death tax." Now, as the top Senate Republican serving alongside a president from the same party, he'll have a chance to further gut it or scrap it altogether. Artful dodgers A second reason is that the tax system operates differently for the wealthiest Americans. Creative lawyers have stitched together obscure regulations, court decisions and narrow rulings to help the rich pass along their fortunes. One mechanism is the intentionally defective grantor trust — or, as estate planners have nicknamed it: "I Dig It." It uses a complicated borrowing strategy to bypass a federal gift tax limit. (The gift tax prevents rich people from giving heirs all their money before they die in order to avoid the estate tax.) By splitting up ownership among family members, wealthy Americans can also claim that assets moved into the trust are worth less than their previous market value. Trump's family did this with his father's portfolio of New York City properties in the 1990s, cutting his gift and estate tax bills. In 2017, Trump's Treasury Department withdrew proposed regulations that would have curtailed these discounts. Defund the police Finally, the I.R.S. struggles to do its job — and that's by design. Republicans have led a decades-long effort to defund the agency. That has meant fewer audits for the ultrarich. In the 1990s, the agency audited more than 20 percent of estate tax returns. In recent years, it was less than 4 percent. Congressional Republicans cut $20 billion for law enforcement at the I.R.S. in a recent spending bill. Sources: Internal Revenue Service; Federal Reserve | By The New York Times Add it all up, and it means that each year the richest Americans pass down approximately $200 billion without paying a dime of estate tax on it, estimates Daniel Hemel, a tax law professor at New York University. I wrote a story The Times published today about Nvidia's C.E.O., Jensen Huang, who uses several estate-tax-cutting strategies, including an "I Dig It." He also has funded something called a donor-advised fund, which reduces his eventual estate tax bill even if that money never goes to charity. He's on pace to avoid more than $8 billion in estate taxes — or about a quarter of what the United States collects annually from the tax. The magnitude of his tax dodge sets him apart. But the way he got there is becoming typical. Related: Trump picked Billy Long — a former Missouri congressman who cosponsored a bill to end the estate tax — to lead the I.R.S. THE LATEST NEWS Manhattan Shooting Outside New York Hilton Midtown hotel.  Karsten Moran for The New York Times The C.E.O. of UnitedHealthcare, Brian Thompson, was shot and killed in Midtown Manhattan. A manhunt is underway for his killer. The police described the killing as targeted. Surveillance cameras recorded the gunman waiting outside a hotel before Thompson arrived, then shooting him in the back with a pistol. See video of the gunman. The gunman has not been identified. The police said he fled into Central Park on a Citi Bike, which could offer investigators digital clues. Pete Hegseth Pete Hegseth, Trump's pick to be defense secretary, said Trump still supported him despite allegations of sexual assault and drunken behavior. Hegseth drank heavily while working as a Fox News host and led two veterans nonprofit groups into debt, The Times found. In a radio interview, Hegseth, a veteran, said he drank to deal with combat trauma, but he denied having a drinking problem. Hegseth has said that women shouldn't serve in combat. He met yesterday with Senator Joni Ernst of Iowa, a Republican and combat veteran who is skeptical of his nomination. Trump is considering replacing Hegseth with Ron DeSantis, the Florida governor who ran against him for president this year. Trump Administration Trump's choice to lead the Securities and Exchange Commission is Paul Atkins, who worked there under George W. Bush. Atkins favors looser regulation of the crypto industry. Kelly Loeffler, a former Georgia senator, is Trump's pick to lead the Small Business Administration. Peter Navarro, a China hawk and tariff proponent, will advise Trump on trade. Navarro served prison time for refusing to testify to Congress about the Jan. 6 attack. Trump replaced his White House counsel weeks after picking him. A Trump campaign lawyer will fill the role. Trump named Gail Slater, a JD Vance adviser, to the Justice Department's top antitrust position, pledging to continue a crackdown on big tech companies. Trump chose Frank Bisignano, the chairman of the payment processing company Fiserv, to lead the Social Security Administration. Jared Isaacman, a billionaire entrepreneur and Elon Musk ally, is Trump's pick to lead NASA. Isaacman has visited space in SpaceX rockets. Supreme Court Chase Strangio, a lawyer for the A.C.L.U. Maansi Srivastava for The New York Times The Supreme Court heard arguments over a Tennessee law that bars minors from receiving transgender medical care. The court appears inclined to uphold the law. A ruling like that could make it harder to challenge laws around other transgender issues, such as sports participation and bathrooms. One of the lawyers who argued the case is transgender — a first for a Supreme Court case. More on Politics Bill Clinton defended the pardon of Hunter Biden but said he wished President Biden hadn't previously promised not to do it. If Speaker Mike Johnson hopes to pass Trump's agenda next year, he could have to wrangle a tiny House majority. Jerrold Nadler will step down as the House Judiciary Committee's top Democrat. Jamie Raskin, who investigated Trump's first administration, had challenged Nadler for the post. International In Ethiopia. Malin Fezehai for The New York Times Two years after a civil war in Ethiopia, the country's north is still reeling from war crimes. Read one young doctor's story. South Korea's defense minister resigned. He said he considered himself responsible for the president's abortive decision to declare martial law. French lawmakers passed a no-confidence vote against Prime Minister Michel Barnier and his cabinet. Barnier is expected to resign soon. A flulike disease has killed at least 79 people in the Democratic Republic of Congo, BBC News reports. A U.N. team is investigating the nature of the disease. Other Big Stories A man shot two boys, aged 5 and 6, at a small Christian school in rural California. The police said both were in critical condition. A Justice Department investigation of the Memphis police found that officers used excessive force, mistreated Black residents and had a poor record of solving crimes. The price of Bitcoin reached $100,000 for the first time. Opinions The New York Times A Russian satellite could have the power to destroy other satellites with a nuclear blast. To maintain peace, the U.S. needs to build on its space treaty with Russia and China, W.J. Hennigan writes. Biden's pardon of his son reinforces the idea that every political party will use the system to benefit its relatives and cronies, the Editorial Board writes. Here is a column by Carlos Lozada on Hegseth's views, based on his book. The Times Sale starts now: Our best rate for readers of The Morning. Save now with our best offer on unlimited news and analysis as part of the complete Times experience: $1/week for your first year. MORNING READS Lamb Chop (top).  Tony Cenicola/The New York Times Second act: For decades, Lamb Chop was a beloved children's television character. She's now a best-selling dog toy. Health: Could dark chocolate reduce your diabetes risk? A study suggests it might. Survival: Hawaiian crows have been extinct in the wild for two decades. Researchers are trying a new strategy to reintroduce them. Lives Lived: Rohit Bal was an exuberant designer who created modern Indian couture by updating traditional garments. He died at 63. SPORTS Mary McGee via Breakwater Studios/McGee Family A pioneer: Mary McGee, a risk-loving motorcycle rider who was often the only woman on the tracks she raced on, could be recognized by her pink polka-dot helmet. She died at 87. College basketball: No. 9 Duke, led by the freshman wunderkind Cooper Flagg, upset No. 2 Auburn, 84-78. N.B.A.: The Miami Heat defeated the Los Angeles Lakers by 41 points. It was the Lakers' sixth loss in eight games. ARTS AND IDEAS Charli XCX is on two of the critics' lists. Sinna Nasseri for The New York Times Three Times music critics came together to collate their choices for the albums of the year. "For me, there was no definitive musical statement for 2024, no obvious pathbreaker," Jon Pareles writes. "But there were plenty of purposeful, heartfelt, exacting and inspired individual statements." See the full list here. More on culture Every December, social media feeds fill with Spotify Wrapped, a personalized rundown of users' musical tastes. This year, many said the feature was a disappointment. Jimmy Kimmel joked about Trump's nominations. THE MORNING RECOMMENDS … Christopher Testani for The New York Times Add olive oil and flaky sea salt to lemon bars for a sophisticated touch. Stop package thefts. Work out on a rowing machine. GAMES Here is today's Spelling Bee. Yesterday's pangram was embanked. And here are today's Mini Crossword, Wordle, Sudoku, Connections and Strands. Thanks for spending part of your morning with The Times. See you tomorrow. Correction: An item in yesterday's newsletter about Biden's trip to Angola used the word descendants when it should have said ancestors. Sign up here to get this newsletter in your inbox. Reach our team at themorning@nytimes.com. Editor: David Leonhardt Deputy Editor: Adam B. Kushner News Editor: Tom Wright-Piersanti Associate Editor: Lauren Jackson News Staff: Desiree Ibekwe, Sean Kawasaki-Culligan, Brent Lewis, German Lopez, Ian Prasad Philbrick, Ashley Wu News Assistant: Lyna Bentahar Saturday Writer: Melissa Kirsch Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for the Morning newsletter from The New York Times, or as part of your New York Times account. To stop receiving The Morning, unsubscribe. To opt out of other promotional emails from The Times, including those regarding The Athletic, manage your email settings. To opt out of updates and offers sent from The Athletic, submit a request. Subscribe to The TimesGet The New York Times app Connect with us on: Change Your EmailPrivacy PolicyContact UsCalifornia Notices The New York Times Company. 620 Eighth Avenue New York, NY 10018