Notes: In George W. Bush has announced his economic stimulus plan. In it, Bush proposes a tax cut by doing away with taxes on dividends paid to shareholders. Opponents immediately pointed out that both Bush and Dick Cheney would gain from doing away with taxes on dividends as would many of their friends.

However, proponents of the plan claim that putting more money in the pockets of shareholders by ending taxes would cause them to spend more, thus stimulating the economy. Many senior citizens who own stock will benefit from ending taxes on dividends. Regardless, this is not a tax cut that will immediately put money into the pockets of working people who arguably are the people who most need a boost right now. In the above cartoon, two workmen mull over how a dividend tax cut. Neither owns stocks nor has ever received dividends. Thus, the line in the last frame pointing out that these are people who will not gain from such a tax cut: "What the hell is a dividend, Merle?"

Bush calls taxes of dividends a "double tax," which is a catchy way to cast them in a negative light. Bush is excellent at branding with catch phrases and nicknames. Still, there are many other double taxes in America.

Democrats rushed out with their own plan which is directed to help the middle class. Somehow, they always sound suspicious when they take on a Republican tax cut. Maybe we just don't believe that Democrats will really cut taxes. From a solely a political standpoint, I think Democrats should have embraced Bush's dividend tax cut, but yelled that it didn't go far enough and then put forth their own tax cuts.
Economics has always confused me since opposing sides can always seem to trot out credentialed economists who will say exactly the opposite thing. Ending the tax on dividends supposedly is a complicated task and even some Republicans have questioned how it can be implemented. For example, only dividends from corporations which have already paid taxes will be exempt. Determining the tax status will require a bundle of new paperwork.

Additionally, state governments are worried about how ending the tax on dividends will negatively impact their revenues. Often when state revenues are lessened by a federal tax cut, the states then enact more taxes to make up for the loss. Thus while the administration gets credit for cutting taxes, we end up paying as much in the end.

Economics is always voodoo economics to me.
01.12.03