Microsoft generally acts in a self interested manner, and this is another example. But I suspect that this might be a bit more complicated than Nathan indicates here. Under the Bush plan, Gates et al would still score big tax breaks even if the dividends were reinvested. Thats because, in the bizarro tax world postulated under the proposal, every dollar of profit that is reinvested can count against the original buying price of the stocks. If I buy at $5 and sell at $10, but in the interim the company reinvests $3 per share, my capital gain isn't $5, but is $2. Under this plan its even conceivable (but probably unlikely)that I could make a profit selling and still claim a tax loss. So if the 16 cents were reinvested, when Gates sold the stock he wouldn't pay taxes on it either. That's the beauty of the Bush tax plan, no matter what you do, the investor class benefits. In fact, its commonly thought that this part of the proposal was added because Microsoft and other tech companies don't issue dividends.

Given that the whole Bush tax plan is very much up in the air, I'd suspect some other reasons behind this change in Microsoft strategy. I also suspect that this has been something in the works for a while.

I'd also be remiss if I didn't say that the Gates Foundation is doing some very good things, and that Bill Gates Sr has worked very hard to create a more progressive tax system in Washington State recently and that his book on the estate tax and his prior work on the issue have been invaluable. That may not make up for the harm Microsft's done to the marketplance, my desktop and the Internet, but its a start.

I agree that this dividend plan was likely not created in response to the Bush plan. And yes, given the odd retained-dividends-will-cut-capital-gains-tax-accounting-nightmare provision of the Bush plan, Microsoft did not have to issue the dividend to get the tax break for Gates.

HOWEVER, explaining the complications of the tax plan is probably less effective than waving the "$38 million tax cut for Gates" blogbite (my coined term equivalent for a sound bite).

This is an ideological godsend for progressives fighting the tax plan, since it just raises the issue-- Why is the richest man on earth getting a tax cut larger than 380,000 other Americans combined? (since most people are getting less than $100 each.)

"Why is the richest man on earth getting a tax cut larger than 380,000 other Americans combined? (since most people are getting less than $100 each.)"

Maybe because he makes more money than most Americans? His net worth is about $40 billion, so you could say the tax cut is about 1/1000 of his worth. I think the average American's net worth is about $100,000, which would mean that his/her tax cut is also about 1/1000 net worth.

May not be exact, but the point is, it's not quite as disgusting as it's made out to be. (Guess I'm not as socialist as I thought I was.) Fact remains that Bush has got the wrong priorities in even focusing on tax cuts, though.

According to William Greider in "Secrets of the Temple: How the Federal Reserve Runs the Country" (a book I highly recommend to anyone interested in how the economy works, why we have a Federal Reserve, and so on), a slight majority of the citizens of the US have a negative net worth if you don't count equity in their houses. This is an assumption that makes sense in most cases, because the equity in your house is something you can borrow against, but not liquidate; if you sell, you have to buy again, or spend the money renting. You can't go without housing.

So I would dispute the contention that the average American's net worth is $100,000. I think that's kind of web-centric; perhaps it's true of most bloggers and surfers, but it's certainly not true of most Americans.

But I would agree with Johnny that Bush's focus on tax cuts is the wrong one. Several polls this week showed that a majority of Americans prefer investing in infrastructure to tax cuts, and this doesn't even assume that two-thirds (or whatever) of the tax cuts go to the richest 5% of the population.

I conclude that people are not dumb, despite what politicians, talking heads, and many web-libertarians say; they are just the objects of the most powerful propaganda machine in history. As I've often said, if the Romans had had television, and six corporations that controlled 95% of the media outlets, we'd all be speaking Latin today.

Having been out of work for 7 months now and a total of 9 months out of the last 16, I can simply say this much ---- if the Bush Tax Plan is to mean anything then Gates should invest these "hard earned dollars" into creating jobs....I repeat creating jobs not investing in some hair-brained scheme to make my wrist watch talk to me.

Question is will Gates and the other members of the "billionaires club" do anything other than invest to earn even more? Just today a news article indicated CT had laid off 1800 state workers.....CT where the exceptionally rich live in Greenwich and where all the Brokerage dollars and Insurance dollars go home at night.

But then why blame Gates.....didn't the BET guy invest 300 million in a basketball franchise with no name,no players, no arena, and no baketballs?

In all fairness...The Bush dividend cut only exempts companies that paid a certain amount of taxes that year. Currently companies like Microsoft are allowed to deduct gains that their employees realize when they exercies stock options. As a result, Microsoft doesn't end up paying a whole lot of federal tax (I know that in 2000 they paid nothing, I'm not sure if the falling market has caused them to have to pay since). As a result, Bill Gates, if not this year than certainly in the near future under the Bush plan, would still have to pay taxes on his dividends.

While Microsoft has gotten away without paying corporate taxes -- they have owed taxes over the last couple of years. According to this article, "Microsoft's tax rate for the past two years was only 1.8 percent on $21.9 billion in pre-tax U.S. profits" or $394 million in taxable profits. It's cutting it close, but a large chunk of the M$ dividend would be tax free.