By becoming secretary of the Treasury, Henry Paulson will take a king-size pay cut, but at the same time will see his tax bill fall by more than $100 million, thanks to a loophole especially designed for wealthy folks who take government positions. Forbes magazine reports that government officials who need to divest themselves of certain assets that could present a conflict of interest in public life may pay not even a penny in tax on those proceeds, as long as they reinvest them in either government securities or government-approved mutual funds within 60 days. Given Paulson’s $484 million in Goldman Sachs stock, he would normally see a tax bill of more than $100 million. Of course, he eventually has to pay taxes on the government investments as well –but only if he sells them. In order to take advantage of the loophole, it must be determined that it is “reasonably necessary” for him to sell his Goldman stake. That, says Forbes, shouldn’t be a problem, given a piece of a major financial firm is likely to present a conflict for a treasury secretary. So although Paulson’s annual salary will dip from $38 million to about $183,500, he’ll save a bundle.
