This columnist in the Wall Street Journal believes that “double taxation” is a serious concern — for the very same reasons listed in the CBPP article that dismisses them: because corporations don’t pay these taxes. He argues that the process by which corporations avoid payment leads to bad buisness practices that an elimination of the taxes could avoid; but, and here is the kicker, only if the taxes were eliminated for corporations — not for individuals! So while reform might arguably be needed, it isn’t being gone about in a way that actually adresses the problem!!!
He argues that if corporations didn’t pay taxes they would pay out more in dividends to investors, which would even help 401K investors. I personally don’t really understand any of this, and I may have mischaracterized his argument, but it is interesting to see The American Prospect and the Wall Street Journal in agreement, even if they don’t acknowledge their common ground. Kuttner doesn’t acknowledge the need for reform, and the Wall Street Journal doesn’t seem to think that it is odd that double taxation of Payroll is not an issue, but dividends is.
“Under the proposal unveiled Tuesday by President Bush, individuals won’t be taxed on the dividends they receive. That might seem like a clever way of pressuring companies into paying higher dividends.
But if the goal here is to bolster the stock market and improve the way corporations are run, it would be far smarter to grant the tax break to corporations, by letting companies take a tax deduction for the dividends they pay.”