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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (172403)	1/9/2003 10:38:33 AM
From: GVTucker	Read Replies (2) \| Respond to of 186894

There is indeed a capital gains tax cut in the Bush tax package. This is accomplished by adjusting the tax basis of your stock by the amount of profits a company earns, less the dividends paid out. In essence it puts capital gains and dividends on an equal level in regards to double taxation. In theory this is fine, but in practice this will be a bookkeeping nightmare. Note also that this is dependent on reported GAAP earnings. As I have been preaching for some time now, GAAP earnings are an opinion, not a fact. I haven't spent enough time thinking about it to come up with potential ramifications, but the Law of Unintended Consequences could be significant here. Another issue that the Duke of URL alluded to is that this still doesn't solve the problem at the corporate level, which is really where the greatest potential efficiency could occur. Interest is still tax deductible, and nothing in the current plan puts retained earnings or dividends on an equal basis with interest. Thus, there is still a disproportionate incentive for companies to have too much debt in their capital structure. I suppose that in the end this is a decent second-best alternative, but I'm not sure that a lot of people fully comprehend the frictional costs that will be associated with the Bush plan.