Temporary Dividend Tax Cut Being Considered By Republicans

by Mike Godfrey, Tax-News.com, Washington

01 May 2003

Reports this week indicate that senior Republican Senators may be willing to consider a temporary dividend tax cut, in a compromise plan aimed at appeasing moderate Republicans and Democrats opposed to President Bush's $726 billion tax cut package.

The dividend tax cut is the flagship policy of the much debated ten year tax reduction package, but it is also the most costly aspect of the plan. It is thought that proposing to eliminate dividend tax for a period of between two and four years will be more acceptable to Senate Republicans, most notably George Voinovich of Ohio and Olympia Snowe of Maine, who have thus far staunchly refused to consider tax cuts totalling over $350 billion, fearing a spiralling budget deficit.

Speaking to Bloomberg, a Republican insider revealed that it is hoped that a temporary cessation of the tax will lead to the measure being made permanent, after its benefits become more apparent.

Meanwhile, Senate Finance Committee chairman Charles Grassley has put foward proposals to phase in the more popular aspects of the tax plan first- such as the income tax cuts scheduled to take effect in 2004, 2006 and 2009- in order to make the transition more palatable.

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