Business owners and investors are selling stocks, seeking
alternative investments and holding off on hiring until the U.S.
government has addressed looming tax increases and spending cuts.
Business owners and investors in the United States are rapidly maneuvering to shield themselves from the prospect of higher taxes next year, a strategy that is sending ripples across Wall Street and broad areas of the economy.
Take Stephen A. Wynn, the casino magnate, who has been a vocal critic of higher tax rates. He and his fellow shareholders in Wynn Resorts, the company announced, will collect a special dividend of $750 million Tuesday, a payout timed to take advantage of current rates. Experts estimated that taking the payout this year instead of next could save Mr. Wynn, who owns a sizable stake in the company, more than $20 million.
For the wealthy like Mr. Wynn, the overriding goal is to record as much of their future income this year as they can. That includes profits from activities as diverse as sales of businesses, one-time dividends and the sale of stocks that have been big winners.
"In my 30 years in practice, I've never seen such a flood of desire and action to transfer a business and cash out," said Kenneth K. Bezozo, a partner in New York with the law firm Haynes & Boone. "We're seeing a watershed event."
Whether they are small-business owners or individuals saving for retirement, investors are being urged by their advisers to reconsider their holdings. Along the way, many are shedding the very investments that have been the most popular over the past year and contributing to sell-offs in formerly high-flying shares like Apple and Amazon.com.
Investors typically take profits from their own portfolios at the end of the year, but the selling appears to be more specific this year. Stocks with large dividends, for instance, are seen as less attractive because of the perceived likelihood of a sharp increase in the tax rate on dividends.
All of that is weighing on the broader financial markets, as worries mount about the economic drag from the combination of higher tax rates and reduced government spending set for January if President Barack Obama and Senate Republicans cannot reach a budget compromise before then.
Fears about the fiscal impasse in Washington, along with anxiety about fading corporate profits and weakening economies abroad, have pushed the Standard & Poor's 500-stock index down about 5 percent since the election. On Friday, major stock indexes had their best showing of the week, after Mr. Obama and Republican leaders signaled that a compromise was possible.
Even if many of the tax breaks scheduled to expire survive a new budget deal, some business owners and investors are bracing for substantial increases in specific areas of the tax code.
The top rate on dividends, for example, could climb to 39.6 percent from 15 percent if no action is taken. Capital gains taxes, which now top out at 15 percent, could rise to more than 20 percent, many financial advisers say. Most investment income will also be subject to a 3.8 percent charge to help pay for Mr. Obama's health care law.
Stocks that pay big dividends have been popular in recent years among investors eager for an alternative to the meager returns on bank savings accounts and Treasury securities. Since October,
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