Tuesday, December 04, 2012

Liberal Businessmen Not So Liberal With Their Own Taxable Income

SEARCH BLOG: ECONOMY and TAXES.

With the prospect of higher taxes on dividends as the Bush tax cuts being replaced with Obama tax increases, wealthy liberal businessmen are acting very conservatively with regard to their own investments.

Costco's co-founder, James Sinegal, appeared at the Democratic National Convention.


From the National Review.
Last Wednesday, the Costco board of directors voted for a special dividend costing $3 billion, which will be completely financed through borrowing. The dividend is timed to take advantage of current tax rates, which will almost triple on January 1, 2013, for wealthy investors such as those on the Costco board. As The Wall Street Journal reports:
Dividends are typically paid out of earnings, either current or accumulated.… We think companies can do what they want with their cash, but it’s certainly rare to see a public corporation weaken its balance sheet not for investment in the future but to make a one-time equity payout.
As The Wall Street Journal pointed out:
One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he'll get to keep nearly $12 million of that windfall, while at next year's rate of 43.4% he'd take home only about $8 million. That's a lot of extra cannoli.
Well, he is certainly taking the uncertainty out of his financial equation.

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