I agree that it is better to allow businesses to write off dividends rather than give investors a tax break--why don't you trumpet that solution instead of reviving populist envy? Besides, what's in it for President Bush? Who ever got elected by appealing to a 5% minority?
I sent you my vote in favor of the tax cut on dividends, and I wanted to tell you that I am not a millionaire. I am a 70-year-old retired widow. I worked many years as a secretary in the days when you worked a whole week for less than it takes to spend in the supermarket in 15 minutes today. I get Social Security, but I depend on dividend income. If this tax cut on dividends helps me as well as the rich, I have no problem with that!
Your cover says "suppose the rich get richer and income inequality gets worse" like that's a bad thing. With the collapse of communism, we saw that equalization of incomes brought economic collapse.
Looking at the success of the American system in recent decades, it appears that the more inequality, the better the economy performs for all sectors. Wouldn't that just bum out the Left!
Belleair, Fla. The Bush team could not have come up with a worse plan. Debt and equity will not be on equal footing, and the tax code will become exponentially more complicated: Interest paid will be deductible and dividends, not, while interest received will be taxable and dividends received, not. By doing it their way, because nearly everyone (except the super-rich) owns stocks in tax-deferred accounts, they can benefit the top 1% at the expense of the bottom 99%. And they would accuse me of class warfare for pointing this out!
The transfer of wealth to the rich through the President's "tax plan" will only add to anger of many struggling Americans. I'll be one of them.
Long Beach, Calif.
"Class warfare" could well have been entitled Crony Capitalism. Under unrestrained capitalism, wealth naturally flows to fewer and fewer people as those that have, get more. Even under current taxation, the few have absorbed a disproportionate amount of the nation's wealth, and Bush's proposal only accelerates this process while tossing crumbs to the public.
El Paso, Tex. I am disappointed that a magazine for sophisticated business execs would put on its cover a question that would flunk it out of any beginning management course. The right question for a manager--and Congress as well--is not a simplistic favor or oppose the Bush plan. Rather, is there an alternative that does the positive things you list even better and with fewer negative consequences for income inequality?
Albert F. Appleton
Did you ever notice that the people criticizing the use of the term "class warfare" are usually members of the class winning the war? I have yet to hear a factory worker, nurse, waitress, cashier, etc. criticize politicians who point out the unfairness of the President's plan or complain that it is "class warfare."
Lawrence R. Dworkin
The real question is whether we should bake a bigger economic pie or obsess over the relative size of the slices. Recent experience around the world suggests that a dynamic and growing economy often exacerbates income disparities, while economies focused on redistribution tend to grow much more slowly. In other words, we can't have our pie and eat it, too.
St. Michael's College
Colchester, Vt. While it makes sense to eliminate the double taxation of dividends, the argument that such measures will stimulate investment spending is completely wrong. Encouraging people to buy equities will boost stock prices, but the vast majority of the new money flowing into the stock market will go to the owners of existing stock, not to the companies that issued the stock originally. Only new offerings of stock will help finance investment in real capital goods, and then only if companies believe they need additional capacity. The Bush plan will benefit only those few individuals who own most of the financial assets.
The supply-side arguments for giveaways to the wealthy were never based on sound economic theory and don't deserve another hearing. We don't need a war between the classes. We need an honest debate about the real benefits and losses from changes in tax policy.
John R. Sellers
The dividend-tax-elimination part of the Bush plan is the wrong tool for the job of economic stimulus, with risky implications from a long-term budgetary point of view. The time frame of the tax-cut package (about 10 years) is also too long. The U.S.'s unexpectedly swift economic slowdown and the return of large budget deficits since the final years of the Clinton Administration should remind us of how limited our forecasting ability still is. Government economic policy should humbly reflect this lack of perspicacity.
Ralph I. Sato
Honolulu President Bush's so-called stimulus plan is not an economic-stimulus plan at all but rather a tax scheme to shift more income to the rich. What the U.S. economy needs is a short-term jobs-and-stimulus package that would boost gross domestic product by 4% or more in 2003--approximately $400 billion--and directly create 4 to 5 million more jobs (there being nearly 9 million unemployed). Standard macroeconomic models of the U.S. economy generally use a fiscal spending multiplier of 2; the federal government would have to increase its spending annually by $200 billion to boost the GDP by 4% in 2003.
Such a $200 billion spending program to create jobs could include, for example: $100 billion to fund 3 million temporary ($25,000 a year) jobs administered by state and local governments, $50 billion in Medicaid grants to state governments, and $50 billion to states and local governments for education and local fire and emergency personnel (as promised by President Bush but never delivered under the Homeland Security act).
The Reagan tax cuts did not stimulate the economy. That cash went to gold, real estate, art, etc. It was the Reagan (and Congress) spending that got the economy going. Bush I was vilified for violating his "no new taxes" vow, but those taxes created the wave Clinton rode to claim credit for deficit reduction. A Bush I-type tax increase may not be called for, but the proposed Bush II tax cut will only worsen the deficit and not stimulate the economy. If the economy benefits from Bush war spending, will the credit be given to the tax cut, a la Reaganomics?
And who gets credit for the deficit?
Cockeysville, Md. I am a little surprised that you didn't mention the Bush plan's impact on the municipal bond market. I do not think most state and local governments would like to compete against corporate dividends on a head-to-head basis. Perhaps the President has decided to limit their ability to borrow money?
Los Altos, Calif.
Investment decisions are not made solely on the basis of available cash. They're largely driven by potential returns. If the economy continues to slow, untaxed dividends will likely end up offshore or in assets that don't produce significant numbers of jobs. Haven't we learned that trickle-downdoesn't?
It will be interesting to see whether companies that have moved their headquarters offshore to avoid corporate taxes will be shunned by investors.
Dale W. Bronstein
Hurst, Tex. Now that large stock options and bonuses have lost credibility for overpaying corporate executives, leave it to the Bush Administration to find another way. Since corporate execs frequently own substantial shares of their company stock, untaxed dividends become substantial untaxed payments to these executive shareholders. Since they're tax-free--and dividends may be paid even when a company isn't particularly profitable--this gambit is even better for execs than bonuses based on profits.
Framingham, Mass. Cut taxes on stock dividends, yes, but by giving each shareholder an exemption only on the first $5,000 of dividends received each year, regardless of which company was the payer. This would avoid most of the drawbacks and retain many of the benefits of the Bush plan and could be sold as encouraging the little guy to buy stocks. Who could object to that?
Robert B. Houston
I believe that a fair tax policy would require that those who have the use of income should pay the tax on that income. I suggest that the double taxation of dividend monies be eliminated by allowing corporations to treat funds paid in dividends as expenses, just as they treat interest payments as expenses. After all, both dividends and interest are payments to someone for the use of their money.
Frank R. Klein
It would make far more sense to raise the ridiculously low cap on the amount of capital losses that investors can take as write-offs. The $3,000 limit does not come close to the losses that the average investor has suffered.
No capital-gains taxes should be paid by a person or a business entity selling one investment in order to buy another. The capital-gains tax of 20% gives the government our unearned income made with after-income tax dollars. Another double taxation, in my opinion.
David C. Lawrence
Pleasant Hill, Calif.
You should be focusing on the Alternative Minimum Tax (AMT) for those people who really are "middle income." When tax rates are reduced, these people will find themselves facing the AMT--which neither the President nor Congress have eliminated. The issue is not rich vs. poor, nor income equality. Congress needs to kill the AMT, approve President Bush's plan, and reform the tax code.
David S. Mohler
Dayton, Ohio Re: "The critics: A fight already lost? (Cover Story, Jan. 20): It's a shame. Dividend policy is held captive to politics. Both Joseph I. Lieberman (D-Conn.) and John McCain (R-Ariz.) do their best to pit the working class against the investor class, but shouldn't the purpose of good public policy be to transform the working class into the investor class? That way, we might make capitalism work for people rather than making people work for capitalism.
Santa Monica, Calif.
Note to Senator McCain: It is 2003. The middle class is the investor class. Please get in touch or get off the stage (again).
John Steven Reel
Marion, Tex. A few years ago, the business media proclaimed that the business cycle, including recessions, was obsolete because of the information-technology boom. Now, similarly misguided, you declare that the social aspects of economic policy, which you label "class warfare," are equally passe. American history has shown that unless fairness, both economic and social, is respected, a political as well as social price will be paid.
Assume that the social contract is obsolete at your own risk.
"Class warfare" is in the minds of the media only. Anyone can earn what they want. The rich pay more taxes no matter how you look at it. I favor the Bush plan--and my annual income is less than $30,000 a year because I choose to do what I do for a living.
And I threw the magazine out.
BusinessWeek has increasingly (like the rest of the right-wing media) become Pravda for the Republicans and the rich of this country. Most dividends that the non-rich receive are in untaxed retirement accounts. So this plan won't change that situation one bit. If companies want to invest in expanding the economy, they can do that now without paying out dividends at all.
Increasingly, the rich want a serf class to fight their oil wars for them while preferring to relocate themselves (for tax purposes) offshore. Class warfare? Traitors is what they are.
Santa Barbara, Calif.
The name BusinessWeek implies you will be covering business. It is not the government's role to allocate the wealth of the nation. Nowhere in the Constitution does "equal outcomes" appear. Keep your stinking liberal social engineering ideas to yourself.
Don R. Sherwood