Posted on 12/12/2012 7:00:40 AM PST by Kaslin
WASHINGTON - Did you see the story about Costco borrowing $3.5 billion to pay a special $7 a share dividend to its stockholders before year's end to avoid being hit by President Obama's higher tax on investors?
What makes this story especially juicy is that it reveals how Obama's fat cat supporters, who bankrolled his bid for a second term and embraced his proposed tax increases, have taken steps to shield themselves from the president's "tax the rich" fiscal folly.
The tax avoidance maneuver, which Forbes magazine calls "a six-year advance on the company's current annual dividend of $1.10 per share", will be a windfall for Costco's richest investors if the tax on their dividends is raised, as Obama has sought to do over the past four years.
One of the people who will benefit from this deal will be Costco's co-founder and former CEO Jim Sinegal who owns more than two million shares of its stock and will collect about $14.4 million from the special dividend. Had he taken that next year, he could be slapped with a tax rate of 43.4 percent if Obama's proposed tax increases become law (boosting the tax rate on dividends to over 20 percent and adding a surcharge tax on millionaires).
Instead, Costco decided to pay its stockholders before Dec. 18 so that the special payoff plus a regular quarterly cash dividend of 27.5 cents will be taxed at the current 15 percent rate under the investment tax cuts wisely enacted under President George W. Bush in 2003.
This means Sinegal, who gave a prime-time speech in behalf of Obama's re-election at this summer's Democratic national convention, would avoid paying about $4 million in higher taxes next year.
Costco is not alone in its early tax-avoidance payouts. Many American businesses, from Wynn Resorts to Tyson Foods, have also declared special dividends to avoid the higher tax rate if the Bush rates expire.
One of the most notable Fortune 500 companies to join the pack is the Washington Post who endorsed Obama for a second term and has warmly embraced his tax increase plans. The media conglomerate has announced it will pay its 2013 dividends "before the end of this year to try to spare investors from anticipated tax increases," reports the Associated Press.
Among those who stand to benefit from the Post's beat-the-tax-deadline -- and pocket a bundle of money -- will be stock tycoon Warren Buffet and his Berkshire Hathaway firm, the newspaper's biggest shareholder.
The Omaha billionaire owns an estimated 1.7 million shares in the Post that could yield him about $17 million. This gives new meaning to Obama's oft-repeated "Buffett rule" that he used in his past campaign to excoriate those who, like Buffett, paid income taxes of 15 percent because most of their income came from stock dividends.
Buffett, who supported Obama, also calls for raising the capital gains tax rate, though he's no doubt happy to get the Post's early tax avoidance Christmas gift.
The rush to escape higher taxes next year isn't confined to just the super-rich, either. In a front page story Tuesday, the Washington Post says investors overall "aren't waiting for a 'fiscal cliff' deal," but "shifting assets to limit effects of looming tax hikes" and "taking preemptive action to get out of harm's way."
"Americans are moving to sell investment homes, offload stocks, expand [tax deductible] charitable donations and establish tax-sheltering gifts before the end of the year," the Post said.
The spreading fear of higher taxes, especially on investors, comes in the midst of an increasingly weak economy: in declining economic growth that may have slowed to 1.5 percent in the fourth quarter, meager job creation that is not keeping pace with population growth, a dangerously shrinking work force, a growing trade deficit, Europe in a recession with double-digit unemployment, and the government on track for its fifth consecutive trillion dollar budget deficit in 2013.
The news media's ballyhooed treatment of last month's lower 7.7 percent unemployment rate belied the troubling numbers behind it.
The Obama economy produced a puny 146,000 jobs in November, far below what is needed to bring the jobless rate down to more normal levels anytime soon.
Last month's jobless rate decline was in large part due to 350,000 long-term unemployed people dropping out of the labor force, saying they were no longer actively looking for work. That meant they weren't counted as unemployed and thus the jobless rate fell. The number of Americans who told the U.S. Bureau of Labor Statistics they had a job actually shrank by 122,000.
If adult labor force participation were the same today as it was in October 2009 -- when unemployment was at it's peak -- "the unemployment rate would be 9.7 percent," said University of Maryland business economist Peter Morici.
Add in more than 8 million part-time workers who can't find full time jobs, and the real jobless rate is 14.4 percent, he said.
The job climate is so bad that BLS said it reduced its estimates of jobs created in September and October by a combined 49,000.
The front page headlines read "unemployment down to 7.7 percent," but the statistics behind that number pointed to a stagnant economy at best and one in decline at worst.
The only reporter taking a really close look at last week's jobs report was Chris Kirkham of the Huffington Post. And it's not a pretty picture.
The BLS jobs report "is masking a deeper truth: many of the jobs being created aren't the kind of high-paying ones needed to bolster an economic recovery," he writes.
"More than half of the jobs created last month were in lower-wage industries, such as retail and hospitality," he found. Better paying construction and manufacturing jobs saw no growth at all.
Obama has failed abysmally to spur faster, job-creating economic growth which is sorely in need of a booster shot from private capital markets -- the very investors he wants to tax into oblivion in 2013.
All of those jackasses who allowed Barry the Kenyan to parade them around as props screaming that they want to pay more taxes are now running like hell to avoid paying them.
Of course they are. Increased income taxes have never had an appreciable effect on them because they hide/classify their assets as other than income.
Not easy for small businesses and the rest of us peons to do.
The most ignorant among us have no comprehension of the wealth and assets of the wealthy. The so called 1% do not earn an income, therefore, their wealth cannot be taxed. Income tax increases truly impact the middle class the most. Changing tax rates on dividends and capital gains is easily worked around by most of the population. The wealthy have earned their money and can merely hold it in the bank and not invest it - living off of it until they die and never paying another tax other than consumption based taxes like sales tax.
The typical ignorant liberal voter lacks rudimentary economic and mathematical aptitude. These proposed taxes will not be imposed on the “wealthy” that they love to hate. Businesses and the wealthy don’t pay taxes - their obligations are merely passed on to the consumer level. What benefit do the poor receive from taxing businesses to the point that the poor cannot buy a gallon of milk with the $150.00 in food stamp benefits they subsist on because the tax burden has driven product costs through the roof?
So, Odumbass’s tax increase will result in LESS money being recieved by taxes...
Imagine that.
Who would have guessed= oh wait, that would be ALL OF US who warned about Odumbass’s policies.
One of the core foundations of “liberalism”, ie, Marxism,
is elitism.
They should not be subject to the same rules as everyone else, because they’re “special”.
We should counter all RAT proposals with a proposal to tax the real rich. Let’s tax anyone with over 250 million...based on world wide riches..a flat 10% OTO to help bail us out. Watch them run from that. Then let’s do an OTO tax of all the huge foundations that fund the left..10% of everything over 250 Million. That would really be taxing the rich instead of taxing the struggling small business owner or upper middle class family that is hoping to send their kids to good private schools.
If I understand this situation correctly, the companies seeking to avoid paying more taxes than absolutely necessary on 2012 earnings can do this only once—by cramming in earnings before the new taxes take effect in 2013. Of course, those avoiding paying more 2012 (and forward) taxes by making use of lower offshore rates can do that—until the US, UK, France, etc. force the offending shelter nations to collect taxes for them or be subject to sanctions of some kind.
Rulers that have decided to deprive certain citizens of assets are both determined and creative. This is a new world, not a BRAVE new world—more like a FASCIST one.
I pray that Our Father will grant courage and fortitude to Americans who will keep the faith and the vision until they prevail or He comes.
Just like John F’n Kerry, “taxes for thee, not for me”..... ****ing hypocrites.
Silly voter. When Warren Buffet says he wants the rich to pay more in taxes, he means those who are on the boundary of becoming super-rich. Buffet wants them to pay more in taxes so they don't cross over into his exclusive club. He never intended to pay more in taxes himself.
Silly voter. When Warren Buffet says he wants the rich to pay more in taxes, he means those who are on the boundary of becoming super-rich. Buffet wants them to pay more in taxes so they don't cross over into his exclusive club. He never intended to pay more in taxes himself.
“The so called 1% do not earn an income, therefore, their wealth cannot be taxed”
What kind of idiotic statement is this?
“their obligations are merely passed on to the consumer level”
Big talk about economic ignorance from someone who doesn’t know how supply and demand works. This is one of the oldest sophisms out there. Costs are passed back to the origin of production. Once again, the “forgotten man” pays for it.
The hypocrisy of the left never ceases to amaze me
Uh no. To hell with that and the horse you rode in on
The wealthiest people within the US do not earn “income”. Their wealth is generational or was earned through business activity prior to today. If they choose to maintain an income stream, they can. If they choose not to, they can live for decades off of their assets. No income, no income tax. No capital gains, no capital gains tax, no investments, no dividend taxes.
Why you choose to be obtuse is beyond me.
And Waren Buffett has been fighting the IRS for a long number of years over his taxes & he owes over $1 BILLION in back taxes.
He won’t pay what he owes, and he makes the most noise about “EVERYONE” paying.
As a business owner, I could probably teach you a few things about supply and demand and what occurs when an enterprise and its owner's tax burden increases. Let me tell you with absolute certainty: I pass the cost on to my customers. The capacity to absorb increased cost is not present.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.