They pay some taxes, they just do it at a far lower rate because it's capital gains. It's not the ultra-wealthy paying 40%, it's the working wealthy. Surgeons, who save lives on a daily basis, pay 40%, guys who sold their startup to Yahoo (or who receive it via dividends) pay 15.
I'm not sure how the dividends helped Gates save over just selling the stock though.
Don't forget Gates' charitable activities. They have significant tax consequences.
Gates can collect dividends as long as Microft pays them. He can only sell stock once.
I don't know the details of Gates' finances, but I'll bet real money that his choices make economic sense from his point of view. Maybe it's a coincidence that Microsoft didn't pay dividends until the rates changed, but ...
FWIW, the rate change was intended to increase the dividend payout rate.
Well, it might be a better investment to hang on to the shares, but it's not tax advantageous when either way results in 15% tax. His charitable activities don't lower his personal tax, they lower his wealth.
Giving most of your money to charity doesn't make economic sense form anyone's point of view, and I don't think Microsoft's dividend was in any way designed to save Bill money. It was done because a company only needs so much cash on hand.
Charitable donations definitely reduce taxes paid via the relevant deduction - that effectively shields income from being taxed.
If you donate stock held for longer than a year, you can deduct the full market value. According to http://money.cnn.com/2001/12/07/taxes/q_appreciated/index.ht... the deduction goes against ordinary income, which is taxed at a much higher rate than long term capital gains.
I'm not sure how the dividends helped Gates save over just selling the stock though.