Corporatism & Crony-Capitalism, Costco Style

Saw this in the WSJ last night and couldn’t wait to post about it. But I see Our Dinner Table beat me to it, and did a fine job, definitely read his entire post.

Costco’s Dividend Tax Epiphany – When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama’s looming tax increase. Is this what the President means by “tax fairness”?

Specifically, the giant retailer announced Wednesday that the company will pay a special dividend of $7 a share this month. That’s a $3 billion Christmas gift for shareholders that will let them be taxed at the current dividend rate of 15%, rather than next year’s rate of up to 43.4%—an increase to 39.6% as the Bush-era rates expire plus another 3.8% from the new ObamaCare surcharge.

More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they’re taking on debt to do so.’

Hmmm. And it gets sweeter.

“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.

This isn’t exactly the tone of, er, shared sacrifice that Mr. Sinegal struck on stage in Charlotte. He described Mr. Obama as “a President making an economy built to last,” adding that “for companies like Costco to invest, grow, hire and flourish, the conditions have to be right. That requires something from all of us.” But apparently $4 million less from Mr. Sinegal.”

And here we see the other side in action.

“As it happens, one of those new stores opened Thursday in Washington, D.C., and no less a political star than Joe Biden stopped by to join Mr. Sinegal and pose for photos as he did some Christmas shopping. It’s nice to have friends in high places.”

This is absolutely despicable behavior on both sides.

Related links:
How Quickly Our Principles Are Lost …

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  • puzzled

    I don’t see a problem here. Mr. Sinegal is doing what’s best for his shareholders. Politicians generally try to help his supporters. What’s the despicable part in all of this?

    • speedmaster

      The shilling for larger govt. for the rest of us, maneuvering for what’s best for himeself, then throwing the rest of us under the bus. Then using his political connections with Biden he gets his payback appearance.