Better Dividend Plans?

Duff, Susanna
May 2003
Bond Buyer;5/2/2003, Vol. 344 Issue 31627, p1
Trade Publication
U.S. municipal bond market would face less of a threat from proposals to exclude dividends from income taxes than under President George Bush's proposal to fully exempt certain dividends from taxation, according to tax experts. Their comments came after the House Ways and Means chairman Bill Thomas unveiled a tax-cut proposal on May 1, 2003 that would reduce taxes on capital gains and dividend income while excluding the President's plan to make corporate dividends tax-free. Thomas' plan would impose a 15 percent rate on both dividend income and capital gains, compared to the prevailing rate of 20 percent that applies only to capital gains. Thomas' combined dividend and capital gains proposal would cost 295 billion dollars which is about 100 billion dollars less than the 396 billion dollar estimated cost of Bush's tax-free dividend plan. Tax experts say Thomas' plan and the proposal to only tax half of dividends received would be less likely to increase state and local borrowing costs than the president's original plan.


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