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To: Lizzie Tudor who wrote (157504)	5/29/2003 9:19:01 PM
From: Victor Lazlo	Read Replies (1) \| Respond to of 164684

<<I reject this POV. It assumes cash payouts in the form of dividends are favorable to mkt share gains. It penalizes growth companies. >> Dividends come from the ongoing profits of mature co's while dramatic equity share gains are usually reserved for the fast growing co's that plow eaernings back into co growth, thus attracting investors due to their future earnings potential. Since the cap gain tax is lower than the div tax, one could argue that double taxation of divs unfairly singles out div-paying co's for extra taxes, thus providing artificial attractiveness for growth co stocks over mature div-paying ones. Why should the govt favor one type of co over another?

To: Lizzie Tudor who wrote (157504)	5/29/2003 10:35:07 PM
From: Oeconomicus	Respond to of 164684

Theres a bunch of guys like you in California, some of them post on that Bush thread here, they are the true blue republicans who refuse to admit that the republican far right churchgoing, all white, anti-choice, pro-gun... Such a "bunch of guys" would have little in common with me. OK, I am white. I reject this POV. It assumes cash payouts in the form of dividends are favorable to mkt share gains. It penalizes growth companies. No, it doesn't assume that - it only partially undoes the opposite bias. And it does not penalize growth companies. In reality, the double taxation of dividends unjustly penalized companies that paid dividends rather than hoarding cash or repurchasing stock. The bottom line is that if a company has investment opportunities with returns that exceed their cost of capital, they will retain the cash and make the investments. If they don't, they will distribute the money to shareholders who will reallocate that capital to investments of their choosing. Why should the tax code discourage them from distributing that surplus capital or encourage them to distribute it by buying stock from only a few shareholders? Capital will always flow to where the returns are highest for the same risk or the risk is lower for the same returns. The double taxation of dividends created perverted incentives and actually hindered the free flow of capital to better uses. Leveling the playing field is a good thing, Liz, not a bad thing. Your worries about the ability of growth companies - at least those with real prospects of providing an attractive return on capital for the risk - to raise capital are unfounded.