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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (10703)	5/17/2003 8:34:12 PM
From: Les H	Read Replies (1) \| Respond to of 306849

The solution to these problems in Bush's proposal would have been to make dividend payments tax deductible at the corporate level. This would have leveled the playing field between individual and institutional investors and lessened the conflict of interest between investors and management. It would thereby have taken the maximum possible advantage of by far the best argument for exemption of double taxation on dividends: that by reducing the cost of dividends to a company, you reduce its cost of capital pro rata, and shift its optimal capital structure away from debt and towards equity. Such a provision, modestly more expensive than Bush's proposal, could have been paid for either by providing for only a 50 percent exemption from corporate tax for dividend payments, or by removing one of the egregious middle-class handouts in the tax code, such as the tax exemption for home mortgage interest. If you capped that at deductibility of $10,000 of interest (the interest on a $180,000 mortgage at today's interest rates) you would shift investment from housing into stocks, thus allowing Fed Chairman Alan Greenspan's interest rate cuts to do some good for the economy beyond simply fueling a housing bubble. By benefiting stock dividends at the expense of high-end homes, you would also not be affecting the income distribution between rich and poor, except to the extent that middle-class housing (in the $150,000-$250,000 range) might become somewhat more affordable. But that's not what they did. Dummies. I had hoped in January that Congress might rectify this mistake, but no such luck. interestalert.com