<HTML>In a message dated 1/6/2003 12:45:36 PM Eastern Standard Time, jmhayes@j-o-r-d-a-n.com writes: <BLOCKQUOTE TYPE=CITE style="BORDER-LEFT: #0000ff 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px">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? </BLOCKQUOTE> Dividends are paid out of a firm's retained earnings, usually as cash, but sometimes in the form of additional shares of stock. Dividend payments are taxed at the corporate level because they're a component of a firm's profit, which is taxable. Since, dividends directly 'transfer' part of a company's profit to the shareholder, the shareholder is (and should be) taxed on the dividend because a) it is income and b) he or she is benefiting from the company's profits as a 'partial owner' of the company. Bush & Co. consider this current taxation method 'double taxation.' But, by removing dividend tax, they're creating another opportunity for companies to misrepresent their financial health, or lack thereof. Here's how. Because corporate executives own shares in their companies (the higher up the exec, the more shares owned), they receive dividends. If they don't have to pay tax on these dividends anymore, it is to a company's advantage to increase the stock portion of executive compensation packages (yes, exactly like what was happening with stock options in the late 90s, but this time with actual shares - so much more direct) and decrease the cash portion. If you were, let's say, a greedy executive and senior enough to make allocation decisions about your corporate balance sheet, you would want to use up as much profit as possible doing this. That way, you'd be extracting more non-taxed money out of the company. So, you'd lower salary and bonus figures on the company balance sheet which would artificially decrease expenses. Instead, you'd pay more salary and bonus out as stock. Less expenses, same revenues make the company look better. But, really it'd be just a multi-million dollar tax shell game - if you looked below the surface.  Great way to create a bubble. Nomi </HTML>