The federal tax cut, which slashed the tax rate on dividends and prompted many companies to increase their payouts, is proving to be a boon for some corporate executives who are reaping millions in after-tax gains.
All shareholders benefit from higher dividends and lower taxes. But for senior executives holding sizable stakes in their companies, the rewards have been especially lucrative.
At Wall Street securities firm Goldman Sachs Group Inc., which raised its dividend by 108%, Chief Executive Henry Paulson will get a $2 million after-tax boost in dividend income each year. Charles Schwab, chairman of discount-brokerage firm Charles Schwab Corp., picks up an additional $5.4 million, Leslie Wexner of retailer Limited Brands Inc. will get $9.3 million extra and Microsoft Corp.'s Bill Gates, whose company announced its first, though modest, dividend earlier this year, gets an $80.3 million after-tax increase.
"You're using the extreme example but any assessment of who owns the most stocks would have to say this dividend cut will tend to benefit the wealthiest taxpayer group the most," says Mark Luscombe, chief analyst for the federal and state tax group at tax-information provider CCH Inc.
The Bush administration maintains its reputation for giving the most to those who need it least. The extra $80 million Bill Gates will get (that's just for this year — wait until you see what Gates gets in 2008 when the dividend tax rate goes all the way down to zero percent) comes directly from the US Treasury, the joint assets of 291 million American citizens. So when your town's police force is reduced, and Head Start is cut, and veterans' benefits are eliminated, remember who is to blame.
