More bluster from someone who can't understand simple math, Cy?
The Short & Simple version for Cy:
Economically correct plan to eliminate double-taxation
1) Make earnings paid-out as dividends a tax deduction for corporations produces:
--- heap big dividend pay-outs, 'cause the companies have an economic incentive to do so.
--- and, helps to reduce corporations unhealthy reliance upon debt, and stock watering schemes.
--- is the method favored by nearly all economists who support ending double taxation of dividends (including Greenspan).
Woe-be-gone, complicated, misshapen, Bush & Cy-favored plan
2) Make dividends tax-free to shareholders (but offer no deduction, no incentive, to corporations for their payment) produces (under the President's plan):
--- little to no increase in dividend payments (so say the corporations, again, they have no incentive: borrowed money gives them a tax deduction... stock watering through options plans gives them a deduction... dividends give them no deduction).
--- Doesn't affect the bulk of all dividend payments - because they are received in retirement accounts which are already tax sheltered (whereas, under the correct approach, these dividend payments would be going up dramatically... even in retirement accounts!) Only a relatively few fat cats who clip coupons in non-tax-sheltered accounts will benefit from the windfall.
--- 80%+ of all dividends from Preferred Classes of Stock will still be taxable ('cause they are defined as interest payments, not dividends).
--- Same for payments from REITS: still taxed.
--- Dividends from a company will be tax-free only if the company paid enough taxes that year.... So, some years div. from company "ABC" will tax-free, and some years they will be fully taxable... and some years part of the dividend payment will be taxable, part will be tax-free, and MAYBE the taxable portion of the payment will go to reduce the capital gains basis a shareholder has in that equity position. Record keeping will be atrociously complicated... it may well may be damned near impossible for extensive mutual fund positions held by the average citizen.
--- Dividends from foreign common stock or ADRs will not be tax-free (again, no taxes paid to Uncle Sam)... except to the extent that sufficient taxes are paid to the government by American subsidiaries of same, or tracking stocks designed to reflect American-only operations, etc. (Again, ridiculously complicated record-keeping requirements, shifting degrees of tax exemption per equity per year... affected by annual profitability, tax payments, percent of pay-out which represents US-designated earnings, etc. P-H-E-E-W!!!!)
In short,
plan #1: Big surge in dividend payments, everyone benefits (even retirement accounts!), restores balance between retained earnings and debt, eliminates the tax code's artificial nurturing of stock watering schemes....
plan #2: Accountants dream (this is a life-annuity for them, there will be continuous need for their services to handle the arcane complications and record-keeping requirements of the plan), little-to-no increase in dividends, no benefit to the vast majority of people who currently receive dividends (only to a very few wealthy... and even they would probably benefit far more under plan #1 with it' much higher rate of dividend payments), only continued corruption and complication of our tax codes. |
