Magazine

Table: The Next-Best Thing?


President Bush's plan to end individual taxes on dividends is in trouble, and he'll have to hammer out a deal with Congress. Here's what's on the table:

THE 50% SOLUTION

Excludes half of dividends and capital gains from individual taxes

PROS Treats all investment income similarly, simplifying taxes on gains

CONS Costs more than $270 billion over 10 years

PHASED-IN APPROACH

Gradually eliminates dividend taxes over 10 years

PROS Eases short-term budget crunch. Backers could accelerate tax cut if deficit shrinks

CONS Provides little stimulus, and masks long-term budget impac

TWO-FOR-ONE RATE

Taxes both dividends and capital gains at 18%

PROS Dividends become more attractive, relative to capital gains

CONS Makes taxes more complicated, costs $230 billion-plus over 10 years

CHEAP AND EASY

Excludes $1,000 in both dividends and capital gains

PROS Reduced filing paperwork and a manageable cost of $3 billion a year

CONS Does little to boost either the economy or the stock market


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