On Mon, Jan 13, 2003 at 01:44:59PM -0800, Fred Foldvary wrote: > There is also a supply-side effect from cutting the marginal tax rate, from > less uncertainty about the company as it shifts to less debt and more > equity, as well as more investor confidence when the profits are sent to > the shareholders rather than retained by possibly theiving executives.
Any idea why the dividend tax, instead of the corporate income tax, is being proposed for a cut? If we want to end double taxation of dividends, it makes more sense to me to eliminate the corporate income tax instead of the dividend tax. Cutting taxes on dividends while keeping taxes on capital gains seems to provide a perverse incentive for companies to retain as little profits as possible, leading to a higher rate of corporate bankruptcy in the future. I predict we'll also see companies issue new stock and then immediately distribute the capital as dividends in order to dilute their stock value - the opposite of the stock buy-back programs that companies undertake today to avoid paying dividends.
