Not to put too fine a point on it. But the current boom in special dividends has got to be one of the most blatant, public—yet totally legal—tax dodges in US history.
The latest to join the parade of companies shoving dividends out the door ahead of expected tax increases tied to fiscal cliff negotiations is database and business software company Oracle, which announced plans to issue its next three dividends before the end of the year. The 18-cent-per-share payouts add up to $867 million. Oh, and a sizable chunk of that cash will go right into the pocket of Oracle CEO Larry Ellison, who would be entitled to dividends amounting to $199 million.
That’s not too surprising: We already mentioned that Las Vegas Sands CEO—and well-known backer of Republican political candidates—Sheldon Adelson could collect about $1.2 billion from the $2.75 a share special dividend on his 52% ownership interest in the casino company. The company will be getting the dividend out the door this month.
But surely corporate America is treating everybody the same. Every jerk with an S&P 500 index fund stands to benefit from the dividend boom, right? Well, yeah. As long as they aren’t in a tax deferred retirement account, like a 401(k) or an IRA. Then tax rates aren’t as big an issue.
But some jerks benefit significantly more than others. In fact, the top 0.1% of all US households by income collected 27% of all $136 billion in corporate dividends in 2010, the last year for which data is available. That’s roughly $37 billion. The top 1% of US households by income collected roughly 46% of that dividend cash, or about $63 billion, according to the Tax Policy Center, a widely respected group of wonks that thinks about this stuff.
And the Wall Street Journal pointed out that companies that have massive influential shareholders such as Oracle and Las Vegas Sands have a much higher likelihood of coughing up special dividends aimed at avoiding tax hikes. What a coincidence.