Anna Nicole and the Estate Tax


February 15, 2007


Browse in Taxation

Our friends in the Yesterday Forever lobby continue to spin the estate tax as a “death tax”, as though the departed fill out tax returns from their graves, and as though a death tax – even if it were one — would be worse than the alternatives,which are life taxes. In truth of course, the estate tax is exactly what the name says – a tax on the estates that the wealthiest people pass along to their heirs. The departed don’t bear the tax; the heirs do.  Which means it’s really a tax on trust fund babies, as opposed to people who work for a living.

If this strikes you as a bad idea, then you might consider the case of Anna Nicole Smith.  Ms. Smith, who usually is described as a “former Playboy Playmate,”  entered celebrityhood for a surgically-enhanced physiognomy, a marriage to an oil-rich octogenarian, and a proclivity – it was not quite a talent – for garish self-presentation.  She died last week in her hotel room in Florida under circumstances that are still under investigation.  It does not seem likely that the estate tax did her in, the Yesterday Forever lobby notwithstanding.  It is conceivable however that a higher tax could have saved her.

Smith’s brief hour on the public stage was a bit like a tawdry sequel to Great Expectations. Inheritance – more precisely the expectation of it – was the central theme. First there was the marriage to J. Howard Marshall II, whose Texas oil fortune ran close to half a billion dollars.  I do not doubt the sincerity of Smith’s devotion to this eighty-nine year old man, nor its depth.  This was apparent to all when she appeared in black, the mourning widow, after Marshall departed a year later.

It must be said, however, that her subsequent pursuit of Marshall’s estate – a pursuit that went all the way to the Supreme Court and has lasted ten years and running – was at least as passionate as her embrace of the man himself.  Then, more recently, came the strange death of Smith’s 20-year-old son by an early marriage, in a hospital room in the Bahamas days after she gave birth to a daughter.  The son was Smith’s presumed heir.  There soon erupted a paternity battle over that new daughter; not Smith trying to nab the inseminator, but the other way around.

First in line was Smith’s lawyer, companion, and (he claims) fiancé, a man with the tabloid-ready name of Howard K. Stern. Stern allegedly gave methadone to Smith’s son not long before he died.  He left Smith herself in the Florida hotel room with a 105 degree fever, two hours before she died. Stern also had drafted the will that left everything to new daughter Dannielynn, on whose birth certificate he appears as father.  Authorities in the Bahamas have questioned him.

Then a former boyfriend by the name of Larry Birkhead appeared and said no, he was the father.  Smith had left him, he said, because he had urged the former Playmate to cut back on the substances; and because attorney Stern was whispering in her ear.  As if this plot was not thick enough already, there then appeared one Frederic von Anhalt – that’s Prince Frederic von Anhalt  — who said that no, he was the one.  Prince Frederic is the husband of Zsa Zsa Gabor, who must be 39 by now, the same age Smith was at her death.

It doesn’t stop there.  Smith’s mother has appeared to contest custody of the infant.  A media outlet got hold of photographs showing Smith cavorting (clothed) on a bed with the Bahamanian Minister of Immigration. (It appears that Smith’s application for permanent residence got fast-track treatment.) Washington is not the only place in which satire has been eclipsed by events.

Nor is this the only family – if that’s the word – that has turned into a lurid drama at the prospect of a large inheritance. Few things can cause so much bad blood within a family, and false and devious relations.  Questions of justice aside, you could make a case that the pro-family position would be the one that gave family members less to fight over – that is, an increased estate tax at the upper levels. Then the siblings, step-siblings, second and third spouses, paramours et al could be angry together at the government, and therefore bonded together by a common enemy.

But the justice issue still does loom, and Anna Nicole Smith’s prospective fortune is a case study in this as well.  The fortune that she hoped would be hers – the J. Howard Marshall II estate – came from oil.  Mr. Marshall did not create that oil; he simply gained legal title to something that was in the ground already.  That legal title did not produce anything in and of itself.  It simply made him the recipient of a stream of unearned income.

This is not like income people work for; or even like income that investment in a new enterprise helps to generate.  If anything must be taxed, is not this the thing? Given that the oil is depleting, and that the use of it befouls the common nest, the case becomes more compelling still, not least when the recipients in question contributed nothing other than to be named in a will.

Consider too what made the oil so valuable, such as the vast public investment in highways, and the educations of the engineers who design the cars that drive on them?  This applies not just to oil but to all monetary wealth.  Those who have it are islands only in their Ayn Rand fantasies.  We all build on the efforts of one another, which is why we all have an obligation to give something back.

It is hard to see how this requirement – which as of this writing still exists – was a great hardship or impediment to Anna Nicole Smith.  It is even harder to understand why President Bush and his cohorts have made such people – sweet and worthy as she herself may have been – the first objects of their solicitude. If they really cared wouldn’t they increase the tax, and give gold diggers less to fight about?