Dividend Tax Cut: 'Has Been The Key Tax Reform Under Bush'

by Mike Godfrey, Tax-News.com, Washington

24 February 2004

Of all the tax changes that have been enacted under the Presidency of George W. Bush, the cut in dividend tax to 15% has been the most crucial, argued the outgoing Assistant Treasury Secretary Pamela F. Olson in an interview with Reuters last week.

Since joining the Bush administration in February 2001, Olson has helped to oversee three rounds of major fiscal reform, although she felt that the gravity of the dividend tax cut is often overlooked.

"We created, through the tax code, this real disincentive for the payment of dividends and the most efficient allocation of capital," noted Olson of the tax environment prior to the changes. "I think that equalizing the tax rate on capital gains and dividends specifically was probably the biggest change to the tax code which we made," she observed.

Olson also believes that the Treasury and the Internal Revenue Service have made great strides in the sphere of enforcement. She claimed that since the government inherited and began to work on a “toothless” IRS in 2001, the practice of corporations transferring their headquarters offshore for tax purposes has been effectively neutralised.

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