Steve Wynn and other US company bosses plan payouts ahead of fiscal cliff

http://www.guardian.co.uk/business/2012/nov/19/fiscal-cliff-steve-wynn-payouts

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Casino magnate Steve Wynn is cashing in some chips as he bets the row over the fiscal cliff in Washington will cost shareholders dear next year. He is not alone.

Tomorrow Wynn Resorts will pay out a $750m special dividend to shareholders as the company tries to get ahead of possible rule changes that could increase taxes on dividends. Wynn, who last year accused president Barack Obama of conducting "class warfare" against the rich, looks set to be joined by a record number of company bosses making payouts ahead of possible tax hikes.

Others including HCA Holdings, the world's largest private healthcare operator, chemicals firm LyondellBasell and asset manager Waddell & Reed, have all announced special dividend payments ahead of the year end.

Obama and Republican leader John Boehner are currently trying to forge a compromise over the fiscal cliff, the year-end expiration of Bush-era tax cuts and the imposition of deep spending cuts aimed at tackling the US's $16tn debts. Unless Congress reaches a deal by the end of the year, dividend taxes will rise from 15% to 43.4%.

A report from Barclays found high dividend yielding stocks are already suffering ahead of a possible tax hike. The two highest yielding sectors in the S&P 500, telecom and utilities, are down 10% and 8% this month, according to the report.

Goldman Sachs recently predicted a record number of special dividends ahead of the year end. The bank published a list of likely payers including MasterCard and Williams-Sonoma.

Richard Sotell, chairman of Boston money manager the Kraematon Group, said the impact of the possible tax changes went far beyond dividends. He said many business owners were considering selling or closing businesses ahead of tax changes.

"I am not making positive actions right now; I am making contingency plans," he said. He said many investors were putting money into gold as they waited out the fiscal cliff discussions. "That's millions, billions that is not going into the US economy," he said.

According to a review of securities filings and conference calls by the Wall Street Journal, half of the US's 40 biggest corporate spenders have announced plans to curtail capital expenditures this year or next.

"The problem is that governments think lineally. They do one thing then the expect people will carry on behaving in the same fashion. But if they do X then people will find ways around it," he said.