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US Experts Welcome Prospect Of Dividend Tax Cut

by Mike Godfrey, Tax-News.com, Washington

23 December 2002


US investment and tax experts have welcomed the revival of proposals to introduce a dividend tax cut in 2003, according to CBS MarketWatch.

Anxious to find cost-effective ways to boost the US economy, the White House earlier this month revived plans to reduce dividend taxation that were floated over the summer. Currently in the US, corporate dividends are paid post-tax and carry no tax credit, which means that they are taxed again as income in the hands of shareholders.

Experts have predicted that any tax break is likely to go to investors rather than to the companies themselves, and it is thought that in addition to addressing the double taxation issue for individuals, a dividend tax cut will have many other beneficial effects for shareholders.

According to CBS MarketWatch:

'Many believe that the repeal would boost dividend-paying stocks, encourage more companies to pay out earnings or hike their dividends, and promote economic growth and productivity. It would also improve corporate governance by motivating companies to pay out their earnings - leaving less in the coffer to be squandered on ill-conceived gains.'

Speaking to the investment news service last week, director of fiscal policy at the Cato Institute supported the government's plan, reasoning that: 'It raises the total return on capital, which will ripple through the economy.'


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