> why the dividend tax, instead of the corporate income tax, is > being proposed for a cut?
If there are zero taxes on corporate profits, but taxes on dividends, then the incentive is to retain earnings rather than pay dividends, and the shareholders get the profits tax-free until the shares are sold for capital gains. The shares might never be sold, but passed on to heirs. For tax fairness, given the income tax, all income should be taxed equally, and for efficiency, the tax system should minimize the impact on decisions. So it is better to tax corporate profits and then credit that against tax liabilities of dividend income. To achieve neutrality, unrealized gains should be taxed annually, and then we can forget about capital gains. That being said, the income tax is inherently unjust, complex, and burdensome, but that is another story. Fred Foldvary ===== [EMAIL PROTECTED]
