<HTML>In a message dated 1/8/2003 7:09:13 PM Eastern Standard Time, christian11@mindspring.com writes: <BLOCKQUOTE TYPE=CITE style="BORDER-LEFT: #0000ff 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px">either way, it's easier for a company to manipulate taxable earnings as a component of profits and pay less taxes How so, since all this stuff is post-tax on the corporate side? </BLOCKQUOTE> Basically, in any way that you could use dividends as cash or in other words, in any way you could capture the former value of dividend tax and shift it back to the balance sheet as a new revenue stream. Here are two rough examples: 1) Say you used to pay a CEO $1mln in cash and 100,000 shares of stock as compensation (stock price = $1). The CEO would have paid a tax on any dividends accompanying those shares.  [$1 mln + 100,000 + (dividend - tax)] But, now the CEO doesn't have to pay tax on his dividend. This is the situation Bush is selling to the public.  The portion that went to the government in the form of dividend taxes now goes to the shareholder.  The outcome is that all shareholders benefit but the largest shareholders benefit the most.  The CEO effectively gets a hefty pay raise and overall wealth is transferred upward. >From a balance sheet perspective, though, there's room to maneuver.  If the company keeps the CEO's compensation level fixed it could: a) give him the same 100,000 shares of stock and $995,000 in cash [i.e. the former post-tax amount], or b) give him (approx.) 95,000 shares of stock and the same $1mln in cash Scenario (a) results in lower cash expenses but the same shares outstanding and therefore, higher (post-tax) earnings per share. Scenario (b) results in same cash expense but fewer shares outstanding and therefore, higher (post-tax) earnings per share.  In both cases the company is able to monetize that portion of the dividend that went to the government in the form of taxes and use it to boost earnings per share.   2) It's similar if you use stock as acquisition currency: Say, Company A wants to buy Company B with stock.  Before eliminating the dividend tax, company A might pay 5,000,000 shares * [share price + (dividend - tax)] to buy company B. Under the revised Bush plan, now 5,000,000 shares is worth 5,000,000 * (share price + dividend). Company A could offer less shares to purchase company B, because the value of those shares is boosted, i.e., say only 4,950,000 are needed. Also, there would be fewer outstanding shares because Company A wouldn't need to issue as many, making Company A's earnings per share is higher. Company A gains twice - once because the currency value of its shares is boosted and second because it limits its total outstanding shares (and thus, incidentally pays fewer dividends). Both examples may seem like micro adjustments, but so are most accounting schemes when you break them down. I'm sure there are far more complex schemes to consider (for fun and profit) once this dividend tax elimination thing goes through (something I used to do for a living before coming over from the 'dark side'). Nomi</HTML>