An Open Letter To The CEO Of Costco

It is a very busy time here in Bloodthirstan and poor Aggie has been under the weather. But I’ve taken notice of this.

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama’s looming tax increase. Is this what the President means by “tax fairness”?

Specifically, the giant retailer 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. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they’re taking on debt to do so.

Shareholders were happy as they bid up shares by more than 5% in two days. But the rating agencies were less thrilled, as Fitch downgraded Costco’s credit to A+ from AA-. Standard & Poor’s had been watching the company for a potential upgrade but pulled the watch on the borrowing news.

We think companies can do what they want with their cash, but it’s certainly rare to see a public corporation weaken its balance sheet not for investment in the future but to make a one-time equity payout. It’s a good illustration of the way that Federal Reserve Chairman Ben Bernanke’s near-zero interest rates are combining with federal tax policy to distort business decisions.

One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he’ll get to keep nearly $12 million of that windfall, while at next year’s rate of 43.4% he’d take home only about $8 million. That’s a lot of extra cannoli.

Get it? This particular limousine liberal supports higher taxes for you and me, and at the same time makes several million additional dollars on a one time dividend payout, created to bypass the new taxes that he supported at the DNC. Isn’t that special?

So here’s my letter:


I’ve shopped with you for years, ever since a friend convinced me that your meats were superior and much less expensive than those at the regular grocery store. However, I am deeply sick and tired of hypocrisy, and this stunt with the dividend is very annoying. I will check out the meats at BJ’s and Sam’s Club moving forward.

Happy Holidays.



  1. Buck O'Fama said,

    November 30, 2012 @ 6:18 pm

    Very well said.

  2. Lime Lite said,

    December 1, 2012 @ 3:07 am

    Walmart and Target gave money to the GOP – Costco gave to the Democrats. Know your enemy. And well said BTW!

  3. Flamin' Liberal said,

    February 10, 2013 @ 3:28 pm

    What a load of BS — interesting that this is the big topic given that Costco – unlike Walmart and Sam’s Club – pays their workers above minimum wage, gives them benefits and makes their lives better. Who’s paying you, the Walton family?

  4. Bloodthirsty Liberal said,

    February 11, 2013 @ 7:33 am

    Better two-and-a-half months late than never, Flamin’!

    But from your keyboard to G-d’s ear! We would be overjoyed to accept even a dime from any Walton (even John-Boy) willing to part with one. Alas, that day has yet to come, and we’re not holding our breath.

    But your comment is good as gold to us. Please keep ‘em coming!


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