Sorta. I think it makes more sense to see them as a return of capital; that is, if you buy a $20 stock, and it pays a $2 dividend, your cost basis would now be $18. The difference would come when you sell the stock: if you sell it for $24, you'd now have a $6 gain rather than a $4 gain (and $2 of "income," perhaps in a previous year). In this sense, the "tax on dividends" isn't really a tax at all: it's just a shifting of the time period for capital gains: pay the tax now rather than when you sell the stock with an adjusted basis (the Treasury seems to favor this kind of "cash now" approach, but I'm not sure it's fair). So Bush's proposal, on the face of it, isn't really revenue-negative, is it? Unless of course he does it (I haven't seen a full proposal; Max?) as a pure "free" item (and not as a shift in accounting treatment), which I have a hard time believing would happen: it's unprecidented.
Look at it from the company standpoint: selling stock doesn't generate income for the company; why should giving the money back be a tax event for the investor?
> Should the Ford
> family pay no income on dividends from the family business?
It's this kind of thinking that led to the AMT . . . I don't have a problem with rich people "not paying taxes" if they've organized their affairs according to a fair tax code.
Anyway, the money that is used to pay a dividend has already been taxed (I presume this part of the treatment of dividends isn't changing: they should not be expensed), lowering the net profit of the corporation and thus the 'value' of the stock itself.
/jordan