Would any company give dividend then?
Wei Dai
<[EMAIL PROTECTED] To: [EMAIL PROTECTED]
om> cc:
Sent by: Subject: Re: questions about dividend
tax cut
owner-ARMCHAIR@g
mu.edu
14/01/2003 08:40
Please respond
to ARMCHAIR
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.
