Posted on 01/17/2003 1:50:34 PM PST by ImphClinton
By November, the fix was in. Attorney General John Ashcroft had indicated that he had little interest in pursuing the case, and several Department of Justice Antitrust attorneys had already left, disillusioned. The result was a settlement neatly summarized by the financial analysts we cited at the time: "a major win; no substantive change in business model or R&D practices; maintain Buy."
Ashcroft had declined to excuse himself from the case: despite having taken $20,000 in campaign contributions for his Senate campaign from Microsoft and refused to disclose contacts with the company. That said, the contribution hadn't done him much good: he still lost the race to a dead man.
So yesterday, remembering its manners, Microsoft got its chance to thank the Administration properly, and it timed the announcement to perfection.
For the first time in its history as a public corporation, Microsoft will pay a dividend to its shareholders. Technology companies loathe paying dividends, although a few pay a token sum. Historically, they prefer to buy back public stock to increase the company's share price: IBM, Intel, Sun and Cisco have spent billions on share purchase programs that effectively shrink the company. Scott McNealy told us it would be a cold day in hell before Sun ever paid a dividend, although in strict terms, both dividends and buy backs are equally money down the drain to a corporation.
Why is this so well timed? On January 6, President Bush announced his new budget, and its centerpiece is the elimination of tax on stock dividends, at the eye-watering cost of $370 billion over ten years.
It should be a hard sell. The administration has already been preparing the public for a move away from progressive taxation, complaining that the poor don't pay enough. Despite targeted cuts to lower income groups, the dividend exemption favors the wealthiest, as most stock holders are institutional investors or extremely loaded individuals, and has been criticized by Bush's former Treasury Secretary Paul O'Neill and from his own side of the Senate.
Lobbyists for technology companies privately oppose the plan, with one telling the Washington Post: "This is not the bill that's going to pass Congress, and everybody knows it." A dead duck, then.
But rumors that a major technology company - Cisco was mentioned, as was The Beast - would break with tradition have been circulating for a little while now.
Microsoft's decision to pay a dividend allows the administration to claim that America's most notorious corporate lawbreaker is in fact, a redistributive angel in wolf's clothing. Thanks to this incredible partnership, we'll soon hear, business and government can get the economy moving. Billions will trickle back to MSFT-holding families, demonstrating that economic stimulus comes not from any Keynesian multiplier, but through the charity of the rich, so justifying the reward, not punishment of the largest corporations. It's a supply-sider's dream!
As an added benefit, this will again sanitize "popular capitalism" - which currently has a rather poor reputation now after the largest loss of wealth in human history - the "Long Boom" having gone Phutt. (Where is Kevin Kelly now?)
Curiously, there is a rational case to be made for encouraging dividends, it's just that the Bush Administration isn't making it. Encouraging long-term stockholding rather than speculative day trading ought to reward profitable companies and encourage long-term investment, taking much of the volatility out of capitalism. That's a case I haven't yet heard, however. I suppose when the Big Lie has worked so effectively, there's little need to resort to reason.
But there you have it: the "Quid" to your "Pro Quo".
What a total crock of crap this statment is. Buying back shares does not "shrink" a compnay, it just reduces the float. Stock buyback also is not money down the drain...because the stock can be resold on the market or used as compensation, or deal making...
PURE, UNADULTERATED BULLCRAP
You're also falling victim to the old static economic analysis that liberals constantly used to attack tax cuts. You're assuming that nobody will change their behavior in response to the tax cut, which is totally false. When taxes on dividends are reduced, more companies will pay dividends and more individuals will choose to own dividend-paying stocks. The tax system as it stands now greatly favors debt financing over equity financing because interest payments are fully deductable by corporations. A dividend tax cut helps to even the benefits of equity financity relative to debt financing and thus will serve to reduce debt and strenghten balance sheets. Finally, relatively high dividend payments (above 3% yield) tend to stabilize stock prices and put a floor under stocks prices that prevents them from being anhilated by short sellers during weak economic conditions. This benefits stockholders, employees, and the economy.
A textbook example of speculative fiction, which you seem to accept as gospel.
You may want to be more selective with your blind credulity. There is plenty of actual news out there, attributable to credible sources, you might hang your hat on instead.
Well, DUH. Interesting essay style: spend the entire piece attacking something and then conclude with the reason it's really good. What an effective tactic, he really had me going for a while.
It's like Jesse Jackson making an hour-long harangue against GWB's thoughts on reverse-discrimination and then finishing up with, "What Bush is missing is that it will show America that blacks are as capable as anyone else."
As a CPA I am calling your BS on this one
Uh ... No
Assume 40% coprporate tax rate. Pretax $166,000 = after tax $100,000
.Bush's porposal:
...Rich Guy $100,000 dividends paid to taxpayer. No individual taxes paid. Top rate 36% savings $36,000
... Middle Class guy $1,000 dividends paid to 401k. Current tax 0% increase in 401k $1,000.
Under my proposal (no corporate tax on dividends)
...Rich Guy $166,000 dividends paid to taxpayer. After tax guy gets $106,666. Top rate 36% savings $42,666
... Middle Class guy $1,666 dividends paid to 401k. Current tax 0% increase in IRA $1,666
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