Sunday, December 9, 2012

Self interest rules–it’s what they do not what they say–even for Saint Warren

Economists stress the absolute importance of “revealed preferences” – what people actually do as opposed to what they say. Here is a classic example of why this simple principle is crucial:

Retailer Costco announced plans to pay out a special $3 billion dividend this year. As Reuters reports, "Several companies have declared one-time cash payouts in recent days ahead of a likely increase in the dividend tax rate due to the so-called fiscal cliff."

Other companies doing similar things include Sheldon Adelson's Las Vegas Sands, Dillard's, Brown-Forman, and Wynn Resorts Ltd. Apple started paying a dividend, and Walmart "moved its planned dividend to late December from early January to help shareholders avoid any increase in the tax rate," the Reuters article says.

The Costco move is particularly rich because the Costco board of directors includes Warren Buffett partner Charles Munger, who has said he is "100%" behind Mr. Buffett's "rule" that would impose higher taxes on the rich. It also includes WIlliam H. Gates Sr., the father of the Microsoft chairman. Gates Sr. has been a vocal advocate of tax increases in Washington State. The board also includes James Sinegal, a Costco founder, who spoke at the 2012 Democratic National Convention in support of President Obama. Also on the Costco board, as the lead independent director, is Hamilton E. James, who was part of that group who recently met with Secretary Geithner and President Obama at the White House.

And Mr. Buffett wants us to believe that tax rates don't affect business decisions? Why are all these businesses all of a sudden paying out dividends now?

Pro market not pro business is the name of the progress game thank you.

Extracts from Reuters and Future Capitalism.


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