Greenspan In Favour Of Dividend Tax Cut

by Mike Godfrey, Tax-News.com, Washington

27 February 2004

The cut in dividend tax passed by Congress last year has played a key part in encouraging investment according to the Federal Reserve chief Alan Greenspan.

“I thought reducing the double taxation on dividends has been an important factor in creating incentives for capital investment," Greenspan commented in testimony before the Senate Budget Committee on Wednesday. "I think continuing a low tax rate, or a zero tax rate on dividends, is a high priority."

The Fed chief also argued for tax relief to be extended, pointing out the long term economic benefits of such a move.

"I've said on many occasions, in my judgment, they should be continued, commented Greenspan.” I am not thinking in terms of the short run - I don't think that is an issue - I am thinking strictly in terms of the long-term viability of this economy," he added.

Nevertheless, he cautioned that government expenditure must also be cut, and stated that the economic benefits that the Bush administration is seeking cannot be achieved by tax cuts alone.

"If you tried to do it all on the tax side, my suspicion is you will find you don't succeed, because the tax base will begin to erode."

"Somewhere in the middle, probably, in my judgment, far closer to the spending side than the tax side, is the necessary outcome," Greenspan noted.

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