rich get richer

Here is another short story on how the rich get richer. Hank Paulson was CEO at Goldman Sachs and when he left to become Secretary of the Treasury he had to sell his Goldman stock. There are divestiture rules that forced him to sell his Goldman stock to avoid any conflict of interest. The sale netted him 500 million of which 20% or 100 million would be taxed as capital gain tax. However there is a part of the tax law that says you can postpone payment of this tax if you invest the money in certain accounts and receive a certificate of divestiture from the government. As long as he allows that money to remain in these accounts he does not have to pay the 100 million in capital gains tax. At 5% he earns 5 million per year on the government’s money. Some people wondered why he would take a job paying $183,000 per year and my guess is he wanted the power but he also made out pretty good on the money end.