Bush Endorses Tax-Law Changes Intended to Calm Investor Nerves
President Bush endorsed tax changes intended to help small investors recover from recent losses and feel better about the stock market.
At his Waco, Texas, economic forum, Mr. Bush seized on two ideas floated by Charles Schwab, chairman of San Francisco investment-services firm Charles Schwab Corp.
One idea would increase the amount of losses individual investors can take as tax deductions to $20,000 from $3,000. The other would reduce the so-called double taxation of stock dividends, to encourage chief executives to pay more in dividends and worry less about their companies' share prices and quarterly earnings.
Bush Adopts Hopeful Tone at Waco Economic Forum
Although Mr. Schwab wasn't specific, the change could be produced by giving companies a deduction for dividends or by trimming or eliminating the tax on individuals' dividend income -- or both.
Mr. Bush gave the proposals a brief but ringing endorsement. "First of all, I love your ideas about how to account for loss and/or double taxation [of] dividends," he said. "That makes a lot of sense."
House Republicans already were considering the change in loss deductions before the August congressional recess. A spokesman for House Majority Leader Dick Armey, a Texas Republican, said Mr. Bush's endorsement "would certainly give the effort a great push forward."
Other GOP officials said bills could be introduced within the first two weeks after Congress returns in September. Those officials said a deduction limit closer to $9,000 is more realistic. Congressional Democratic aides suggested that raising the limit on loss deductions even that much could cost the government $3.6 billion or more each year, and would set off an additional round of stock selling.
As for ending taxation of dividends at the corporate or the individual level, Democrats said it would be prohibitively expensive. They cited a 1992 Treasury Department study suggesting a shareholder exclusion would have cost $13.1 billion annually in 1991; they estimate the cost could be double that now. As for a corporate-level deduction, the report said that would leave dividend income to foreign investors and tax-exempt organizations untaxed and would be "substantially more expensive" than an individual break.
Senate Democrats are considering a proposal of their own to help investors: increasing the age at which individuals must begin withdrawing funds from tax-advantaged accounts. Individual-retirement-account owners, for example, must start withdrawing from their accounts at age 70½. Such investors could be forced to take losses by withdrawing their money sooner than they want. Raising the payout age to 85, for example, would give a continued tax break to those who need investment funds the most, Democrats said. |
