Looming Tax Hikes Causing Business Owners To Cash In

George Lucas (the man who forgot that Han shot first) sold LucasFilm to Disney (Walt is turning in his grave since Eisner took over) for $4.05 billion (a fraction of the national debt).

While the news of the sale may be causing mixed reactions among Star Wars fans one thing is known. Lucas selling the company in 2012, or more accurately, before 2013 for a reason. Onerous taxes on capital gains are about to get more onerous in the coming year. Lucas soldout long ago, but he sold to Disney now may have been timed intentionally.

Wade Westhoff, a financial adviser based in Danville, Calif., says of the Disney deal...“This is a textbook example of exit planning for a private business owner.” ...
That Lucas struck a deal in 2012 may be no accident, either, advisers say. Long-term capital gains tax from the sale of assets held more than one year are taxed at a rate of 15% for investors in the 25% income-tax bracket or above (Lucas’s level), and zero for investors in the 10% or 15% bracket. Those rates are set to jump to 20% and 10%, respectively in January. “He probably wanted to take advantage of the lower rate on long-term capital gain while it’s certain,” says Bill Smith, managing director at CBIZ MHM, a national accounting and professional services provider.

There really is not a justification for stealing someone's capital gains like the government already does. It is, quite simply, a move to foster and maintain class warfare and nurture hatred of the wealthy. It is quite sad that this has to happen all because of people who think that the productive people in the nation MUST carry the weight of the non- or under-productive.

The problem is not limited to the likes of Lucas. Many small businesses are facing similar decisions.

A looming increase in the capital-gains tax rate next year is fueling sales of some privately-held businesses.

Many business owners—mostly founders who could gain a lot from a sale—are looking to close deals before next year, when the maximum tax on investment income is scheduled to rise from 15% currently to at least 23.8% on most capital gains, at least for higher-income households. Many sellers intend to convert their equity into retirement funds or just start anew.

Again, there is no moral justification for stealing someone's fruits of investment. And notice that the tax theft rate is cutting into what could otherwise go into retirement funds. To be clear, capital gains taxes apply to pensions as well. Think of that the next time you hear a senior citizen pissing vinegar about their pensions not growing much.

Taxes affect business decisions. I would posit the affect is much stronger for the more "negative" consequences like layoffs, relocations and selling/closing.

Bert Wolf of Acetylene Oxygen in Harlingen, Texas, says he plans to sell his compressed-gas business before 2013. Many business owners are looking to close deals by year's end.

"It just made more sense for me to take my chips off the table and go do something else," said Bert Wolf, 60 years old, who has an agreement to sell his compressed-gas business, Acetylene Oxygen Co. of Harlingen, Tex., before year-end.

I can hear someone wanting to say, "It is only a 7% increase. Big deal." First, that is WAY bigger than the GDP growth and so it is unfair. Essentially that rational is saying that government's "income" should grow more than the people who pay for "income" can earn.

The average citizen whines when their bills grow faster than their income. Yet the hate-the-rich crowd have no qualms about imposing that situation on fellow citizens. Hatred justifies much for people.

Second, that 7% is gargantuan.

Mr. Wolf added that if he waited until after the tax increase to sell, he would have to expand the business at the current rate "for at least 3 or 4 more years to achieve the same after-tax sales dollar."

And it might be fair to make this a partisan thing, or at least a reflection on Obama's economic policies.

To be sure, the weak economy has been difficult for many small-business owners across the board. The median selling price for U.S. small businesses in the quarter ended Sept. 30 was $174,000 down 8.2% from four years earlier, according to BizBuySell.com, an online small-business marketplace. The firm's findings are based on sales, reported voluntarily by business brokers and mostly of less than $1 million, in 70 major markets.

Anecdotally I am encountering a huge resistance to hire until it is determined who wins the election. Add that to the number of business closing, contracting or selling under Obama and add to that the number of business that are warning of contraction and closures if Obama wins and you have a good understanding of how the job producers and job makers of the country feel about the business culture.

Putting the squeeze on the rich puts a bigger squeeze on the middle class who rely on the rich for jobs.