Posted on 05/15/2003 5:34:26 PM PDT by NormsRevenge
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Senate Votes to Hold Stock Dividends Tax
By MARY DALRYMPLE, AP Tax Writer WASHINGTON - The Senate voted Thursday to suspend taxes on stock dividends for three years, restoring the centerpiece of President Bush's economic plan in a package of tax cuts that is still half the size he wanted.
"It would encourage investment, it would encourage jobs, it would encourage growth," Sen. Don Nickles, R-Okla., said just before Vice President Dick Cheney cast the tie-breaking ballot in the 51-50 vote to abolish dividend taxes in 2004, 2005 and 2006. The taxes would be restored in 2007.
Sen. Max Baucus, D-Mont., said the dividend break will come at the expense of married couples whose tax breaks were scaled back to make room in a tight budget. "Americans today who otherwise will receive the relief on the marriage penalty contained in this bill are going to be subsidizing and paying for, in effect, these tax-free dividends," he said.
To hold the votes of moderate Republicans, the package includes $20 billion in new Medicaid and other aid to states and tax and fee increases totaling $90 billion, limiting the net cost of the package over the next decade years to $350 billion.
Democrats argued that a payroll tax holiday rebating some Social Security and Medicare taxes to workers would stimulate the economy faster than suspending dividend taxes, but their ideas were repeatedly rejected by narrowly GOP-controlled Senate.
"I'm not opposed to creating millionaires. I think the country needs more millionaires," said Sen. Mary Landrieu, D-La. "What I'm opposed to is constantly this other side coming to the floor trying to give breaks to the people that are already at the top at the expense of those at the bottom."
The bulk of the bill moves up cuts in income tax rates passed by Congress two years ago, increases the child tax credit to $1,000 and gives married couples a tax break. It also lets small businesses expense more of their equipment investments.
The Senate bill still has to be merged with a $550 billion package of tax cuts passed last week by the House, where Republicans rejected Bush's proposal to eliminate dividend taxes. Instead, the House voted to cut the maximum tax rates on both dividends and capital gains to 15 percent. Those maximum rates are now 38.6 percent and 20 percent respectively.
House Republicans criticized the temporary nature of the Senate's action on dividends compared with the House rate cuts that would last a decade.
"My view, it doesn't solve the problem," said House Speaker Dennis J. Hastert, R-Ill. "There needs to be a permanence."
Two Democrats, Sens. Ben Nelson of Nebraska and Zell Miller of Georgia, gave Republicans the edge they needed for suspending dividend taxation, keeping the idea alive when lawmakers meet next month to put the bills together. The Senate Finance Committee had decided earlier to excuse investors from taxes on the first $500 in dividends each year.
Republican George Voinovich of Ohio declared himself the 50th senator to back the plan Thursday morning after the White House agreed to convene a commission to rewrite the entire tax code. "We're going to do some honest-to-God tax reform," he said. Republican Sens. John McCain of Arizona, Lincoln Chafee of Rhode Island and Olympia Snowe of Maine voted against the dividend tax suspension.
Bush proposed abolishing taxes on stock dividends as a way to streamline the tax code and eliminate the double taxation of business earnings — taxed first at the corporate level, then when the earnings are distributed to shareholders. The Senate plan goes a step further, eliminating taxes on all dividends, whether or not the company pays taxes on the earnings.
"The effect of this amendment is to, in many cases, not only eliminate double taxation of dividends but also eliminate single taxation of dividends," Baucus said.
The price tag on the Senate's dividend plan is $124 billion, much less than the $400 billion plan the White House drafted. An analysis by the liberal-leaning Center on Budget and Policy Priorities concluded that if the suspension is turned into an abolition of dividend taxes in 2007, the cost of the Senate plan would total $660 billion over the decade.
The Senate had to work within a budget passed last month that limited tax cuts to $350 billion through 2013, forcing Republican tax writers to scramble for new sources of revenue. The Senate planned to weigh whether to keep a tax increase on Americans working abroad that raised $35 billion but aggravated business and energy interests.
The package gives states $20 billion in aid over the next 18 months and cracks down on corporate tax shelters, funneling the new revenue to other tax cuts.
The Senate added language blocking companies such as Enron and Global Crossing that overstated their earnings from claiming a tax refund. "This will ensure that corporate con artists pay their full freight for duping shareholders," said Finance Committee Chairman Charles Grassley, R-Iowa. Senators also agreed to reformulate Medicare to give rural states more money, and to cut taxes on business profits earned abroad and brought back to the United States to 5 percent from 35 percent for one year. John Breaux, D-La., failed in his attempt to repeal a tax increase on Americans working abroad. Those workers would no longer be able to exclude the first $80,000 of their foreign income from U.S. taxes, but they could claim a credit against any foreign taxes paid.
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On the contrary........
After the 2004 elections there will be 5-8 more republicans in the Senate and 20-40 more Republicans in the House.
In 3 years the elimination of taxes on dividends will be made permanent!
Tomorrow dividend paying stocks will soar.
Bout time, been sitting on them forever.
Yes they are. They are documented on Form 1099DIV & must be reported on 1040 Schedule B.
"Stock dividends" is exactly the correct term.
3 GOP Senators against Bush economic plan in its current form
"Stock dividends" is exactly the correct term.
Per The 'Lectric Law Library's Lexicon On * Stock Dividend, Stock Split * :
STOCK DIVIDEND - A dividend paid in additional shares of stock rather than in cash.
Tomorrow dividend paying stocks will soar.
Maybe, but it'll be temporary. This is nothing more than Keynesian pump priming in the disguise of a tax cut.
I'm a Reaganite. Almost the exact opposite of a Bushie.
Bush kept the Democrat Texas House from raising taxes for all of his years as Gov..
Which does nothing to stimulate an economy. Tell me, just how much did Texas government grow while he was governor?
Bush could have had just about anything he wanted in terms of economic policy since 911. The claim that he has to make these major comprises is no more than an excuse for his poor economic policies.
Are you kidding? He's having to fight the Senate Dems and RINOs at every turn to keep them from gutting even the modest tax cuts he proposed. You'll see real tax cutting and tax reform when the GOP gets a real majority in the Senate. They sure as hell don't have one now.
And when they do, you'll claim that he'll need a supermajority. I've kept track of all the president's economic speeches. He's getting exactly what he wants -- a stagnant economy dependent on the government, with just enough smoke and mirrors to keep most of the base happy.
There is nothing "moderate" about these demented liberal scum, and the least we can do on the right is to stop referring to them as so.
They are TAX AND SPEND LIBERALS.
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