Obama-friendly retailer issues special dividend to avoid Obama tax increase
As Twitchy reported on Thursday, Vice President Joe Biden attended a Costco grand opening. He noshed on free samples, checked out some kiddie books (reading is hard), and went looking for pie. Good times.
Why Costco and not, say, Sam’s Club? It might be because Costco co-founder, former CEO, and current Board member Jim Sinegal is a supporter of President Barack Obama. Here he is at the Democratic National Convention in Charlotte talking about how awesome Obama is:
Late last week, Sinegal and the rest of the Costco Board of Directors voted to pay shareholders a special $7 per share dividend to avoid higher dividend taxes that are scheduled to go into effect on January 1, 2013. As the Wall Street Journal notes,
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.
That’s a shrewd business decision, no question. But some Twitter users felt it was hypocritical:
WOW COSTCO: You preach tax fairness & vote to write themselves huge dividend check to avoid the Obama tax increase on.wsj.com/Tum6FC
— Janie Barrera (@janieloo) November 30, 2012
— Vincent deCastro (@SimplyGOP) December 1, 2012
Costco borrows $3B, not for new jobs, not for expansion, but to pay special dividend to beat Obama tax increases! j.mp/UwU3bI
— Cyril Matthews (@cnmatthews) December 2, 2012
Costco cofounder endorses BO but takes his own Costco dividend bfr the tax hike with money Costco borrowed! Tax avoidance at its best.
— RN for Liberty (@kmf829) December 1, 2012