The Costco comedy and the left’s problem getting its own rich people to march in step

by Ryan Streeter on November 30, 2012. Follow Ryan on Twitter.

When faced with the very tax policy they have advocated on behalf of President Obama, rich executives behave like “the rich” they love to hate in their public comments. That’s a pretty clear lesson from the Costco dividend comedy, to which Kevin Williamson at NRO and the WSJ editors rightly draw our attention. The latter write:

[Costco] 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.

As Williamson notes, President Obama’s plan to raise income taxes on people earning more than $250,000 annually will have small revenue consequences, while the very rich will continue to get by paying a lot less in taxes since they accumulate their wealth through capital gains. But even so, the elevated income taxes force rather large behavioral changes among investors, since dividends are taxed at the income rate, not the capital gains rate.

So, in Costco’s case, the board, which includes some of Obama’s loudest and most prominent backers, decided to vote itself a pre-Obama-tax-hike payout. For Jim Sinegal, Costco founder and former CEO and DNC Charlotte headliner, that means $5 million more than he would keep if he took the dividends under the proposed Obama tax regime.

As Williamson notes, nothing Costco is doing is illegal, but:

When a firm run by Mitt Romney does this, Democrats call it “vulture capitalists loading up companies with debt in order to write themselves big paychecks.” When companies that make friendly noises about Barack Obama do it, they get a personal visit from the vice president. [Biden went to a Costco ribbon-cutting recently in DC]

I have never shopped at Costco, only because my family and I have lived in urban areas that make it unpractical, not because I have anything against the company. I have met Sinegal, and I was impressed by his commitment to his employees and to making Costco an appealing place to work. I’ve also seen first hand some of the great things he and his family are doing in Africa.

So I have nothing against him or the store.

And I have nothing against his board’s decision to take dividends before their taxes go up.

But I think it’s worth pointing out that the Costco example shines a light on the charade that the Left’s campaign against the rich and on behalf of the middle class really is. Nothing in the tax policy Obama and his backers support will help the middle class (do the math…everyone knows the revenue won’t pay for a thing that the middle class needs). And his rich backers routinely behave in matters of personal finance in a way that shows they really don’t want to “pay a little more,” as the President repeatedly admonishes wealthy people to do.