In other words: A discussion of The Bush Administration
Finally, someone expressed some level of reasoning behind the dividends portion of Bush's proposed tax cut. Cokie Roberts, on this morning's NPR Morning Edition explained the logic behind the elimination of dividends taxation was less to benefit the super-rich (who make up the great bulk of stockholders who collect dividends) than it was to encourage more companies to offer tax-free dividends. The logic this will reinvigorate consumer demand for stocks by promising a regular income from their stock purchases. And because the dividends would be untaxed only when the company's profits (which would make up dividend offerings) were already taxed, it would discourage companies from hiding all their profits in tax shelters, thus providing more revenue to the federal government.
Of course, this logic only benefits people outside the upper classes only insofar as the non-upper classes have additional income to invest in stocks. It also supposes those people will willingly reinvest in stocks after the profound burn of the go-go 90s. With rising unemployment, a continued distrust in the financial markets (the 1.4 billion dollar settlement with Wall St, along with it's "we're not going to admit anything" clause hasn't helped), and consumer credit what's out the stratosphere, the likelihood that this tax cut will, in fact, benefit any group other than the super-rich remains suspect.
Never mind the specious logic tying the cut in dividend taxes to increased employment. The $500 the Senate plan preserves tax-free saves anyone earning such a high dividend all of an additional $170 to pump back into the economy. Way to stimulate the economy, Dubaya.
- Alex 11:59 PM - [PermaLink] -
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