Companies have started planning their moves as soon as the news of increased tax rates spread in the market like a forest fire. People who had previously invested in shares that paid good dividends such as large beverage companies and McDonald's are selling their stocks as they feel they wouldn't be of any benefit same time next year. John Moorin a medical equipment company owner near Indianapolis claims that he sold $650,000 worth of shares of high-dividend paying companies mentioned above. According to him he won't benefit from these shares at all after the tax increase.
With Obama getting elected for second time it is nearly sure that tax rise will be in congress any time now to serve his health care program. After the 15% limit set by George W. Bush during his term as president. Obama explains this step as he claims that now even big entrepreneurs are paying lower taxes compared to average workers.
Companies like Wynn resorts Limited owned by Casino Magnate Steve Wynn have started planning for the increase. Wynn who has supposedly been an open critic of high tax rates has planned a special dividend rollout anytime now, worth a whopping $750 million. This previously used to be the amount of four dividend roll-outs. But this seems to be a well-planned step as the company is supposed to save around $20 million if the roll out was made after the tax increase. The plan actually should work as the holders will also benefit from the payout. Question also remains if the tax increase will benefit or negatively will affect the shareholders. Even if seems that premature dividend is dodging the tax increase.
"It's a foregone conclusion the rates are going up; It's just a matter of the rise %", Said Todd Lowenstein, a money manager with High Mark Capital Management Inc. based in Los Angeles. According to him the increase in taxes is sure and maybe somewhere near 39% (normal tax rate). So, it is a good time for companies to payout their shareholders a bit of amount that won't be wasted in any case and will definitely create goodwill for the company.
Standard & Poor also went to the down street after sensing the possible tax increase and has fell 5% in the last week itself. Only, it was Friday when President Obama and a few other significant Republican Leaders showed some signs of relief that the market recovered a bit.
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