Thursday, April 27, 2006

A Weird Thought on Economics, Taxes, and the Federal Budget…

The tax code was changed by President Bush for tax year 2004 to re-emphasize dividend investment.

During the Clinton era of 'Peace and Prosperity' dividend investment had basically been taxed out of existence – capital gains were tax advantaged. Thus, President Clinton’s tax policy favored stock price growth while President Bush balanced stock price growth and dividend investment – both are taxed identically.

What has that done? Dividends are desired by investors because they are cold, hard cash payouts resulting from stock ownership. Put simply, investors are sent cash every quarter for owning stocks in a dividend producing company. Why does that matter?

Dividends are reliable income for those living on investments


Drum Roll Please…

Dividends are paid out to shareholders in AFTER tax corporate profits. Note the trend:

Revenue SourceFY2000FY2001FY2002FY2003FY2004FY2005
Individual Income Tax1,004,461994,339858,347793,699808,958927,222
Corporate Income Tax271,288151,075148,042131,778189,370278,281

That's right!!!
Bush's Individual Tax cuts increased that revenue stream by 17% in two years
and, Bush's Dividend Tax changes resulted in increasing that revenue stream by 111%
and, now corporations are paying a larger ratio of taxes than anytime in recent history

Investors demand dividends - they are more consistent than praying for Enron style stock price appreciation. They are cold hard cash. Dividends are paid with Corporate AFTER TAX profits. Thus, corporations now jigger their books to show more TAXABLE profit.

So, EXXON now shows an $8.4 Billion profit...
That profit was probably there before CY2004.
That profit will now be taxed as Corporate Income.

So, big spenders, you will now get far more tax revenue to blow...

1 comment:

Major Mike said...

There you go...confusing the issue with facts again. Dang you're pesky. Nice work!!!MM