Costco's co-founder, former CEO and current board member Jim Sinegal, is a case in point. As the Journal reported, Sinegal went on the campaign trail in 2012 for President Obama to argue for higher taxes, but he and his fellow Costco directors figured out a way to protect themselves and their shareholders. The Costco board recently voted to approve a special $7 per share dividend to be paid to shareholders in December to avoid paying higher taxes next year. (In the interest of full disclosure, I, too, supported moving up the payout by a few days for a regular quarterly dividend for a public company on whose board of directors I serve.)
There's nothing wrong with what Sinegal and a host of others have done (though one might question whether Costco's decision to borrow $3.5 billion in order to award the special dividend is wise.) These companies are making decisions in their shareholders' interests -- and that is exactly what they are supposed to do. In the case of corporations, the money involved is the shareholders' -- no one else's. And directors' fiduciary responsibility is to maximize shareholder profit in a lawful and prudent manner.
But liberal policy makers never seem to understand the human instinct to protect and preserve what one has earned. They think that if they raise rates higher, revenues will increase automatically. What liberals never fully anticipate is that their decisions will change behavior in ways that will thwart liberal objectives. If long-term capital gains tax rates will increase next year, individuals have an incentive to sell now and pay lower taxes. If taxes on dividends will go up dramatically, corporations have an incentive (maybe even a duty if they're sitting on a lot of cash) to pay out those dividends early so that they'll be taxed at the lower rate.
If President Obama had ever spent one week working in the real economy, he'd understand this. But he's too obsessed with soaking the rich to figure out that we can never tax our way to prosperity. We're far better off trying to control government spending as a way to avoid the fiscal crisis ahead than to think we can avert disaster by waving the tax-hike magic wand.
Linda Chavez is chairman of the Center for Equal Opportunity and author of Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics .
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