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The centerpiece of President Bush's tax cut in 2003 was a sharp reduction in the individual d... more The centerpiece of President Bush's tax cut in 2003 was a sharp reduction in the individual dividend tax rate. The dividend tax cut was designed to spur investment and boost the stock market by increasing the after-tax return on corporate earnings, thus raising stock valuations. The tax cut also reduced the tax bias against dividends to spur larger payouts to shareholders. That reduces the amount of discretionary cash available to executives and will likely reduce the number of Enron-style corporate financial scandals. This study examines the impact of the dividend tax cut after one year. We gathered data on dividend payouts before and after the 2003 tax cut for all Standard & Poor's 500 companies. We found a highly positive response to the tax cut: Annual dividends paid by S&P 500 companies rose from 146billionto146 billion to 146billionto172 billion, an increase of 26billion.Inaddition,specialdividendsof26 billion.In addition, special dividends of 26billion.Inaddition,specialdividendsof7 billion have been paid, raising the total first-year dividend increase to $33 bill...
We wish to thank Jay Bhattacharya for his review of this study and his instructive advice. The vi... more We wish to thank Jay Bhattacharya for his review of this study and his instructive advice. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
President Obama says he wants to fix Social Security, but by ruling out both benefit cuts and inv... more President Obama says he wants to fix Social Security, but by ruling out both benefit cuts and investing in real assets, he leaves only one possibility: a massive, unprecedented tax hike.
Free from regulation, the Internet has been a bright spot in our weak economy, with tech sector u... more Free from regulation, the Internet has been a bright spot in our weak economy, with tech sector unemployment at just 3.3 percent. The net neutrality order will start us down the path to crippling it with regulations. A study from NYU found the rule will destroy between 100,000 and 200,000 jobs.
Across the nation, large budget gaps are forcing state governments to make tough policy choices. ... more Across the nation, large budget gaps are forcing state governments to make tough policy choices. While some states are trying to control spending, others are turning to tax increases to balance their budgets. Some state officials are trying to pass the buck for their poor fiscal management by pleading for a bailout from Washington. But a bailout would encourage states to continue overspending, which is the source of the current fiscal mess. The states' mistake was to allow rapid tax revenue growth during the 1990s to fuel an unsustainable expansion in spending. Between fiscal years 1990 and 2001, state tax revenue grew 86 percent-more than the 55 percent of inflation plus population growth. If states had limited spending growth to that benchmark, budgets would have been $93 billion smaller by FY01representing savings roughly twice the size of today's state budget gaps. If revenue growth higher than the benchmark had been given back to taxpayers in permanent tax cuts and annual rebates, rebates could have been temporarily suspended during FY02 and FY03 to provide a cushion with which to balance state budgets. Current budget gaps provide policymakers an opportunity to weed out the budget excesses built up during the past decade. Yet overall state spending continues to grow. After soaring 8.0 percent in FY01, state general fund spending has not been cut in FY02 or FY03 even as large budget gaps have appeared. States should impose tax and spending growth caps to prevent budgets from growing too quickly during the next boom. Revenue growth above a benchmark would be given back in tax cuts and tax rebates. That would prevent spending from increasing too quickly and provide the option of suspending rebates during slowdowns to close budget gaps without the damage caused by tax rate increases.
The centerpiece of President Bush's tax cut in 2003 was a sharp reduction in the individual d... more The centerpiece of President Bush's tax cut in 2003 was a sharp reduction in the individual dividend tax rate. The dividend tax cut was designed to spur investment and boost the stock market by increasing the after-tax return on corporate earnings, thus raising stock valuations. The tax cut also reduced the tax bias against dividends to spur larger payouts to shareholders. That reduces the amount of discretionary cash available to executives and will likely reduce the number of Enron-style corporate financial scandals. This study examines the impact of the dividend tax cut after one year. We gathered data on dividend payouts before and after the 2003 tax cut for all Standard & Poor's 500 companies. We found a highly positive response to the tax cut: Annual dividends paid by S&P 500 companies rose from 146billionto146 billion to 146billionto172 billion, an increase of 26billion.Inaddition,specialdividendsof26 billion.In addition, special dividends of 26billion.Inaddition,specialdividendsof7 billion have been paid, raising the total first-year dividend increase to $33 bill...
We wish to thank Jay Bhattacharya for his review of this study and his instructive advice. The vi... more We wish to thank Jay Bhattacharya for his review of this study and his instructive advice. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
President Obama says he wants to fix Social Security, but by ruling out both benefit cuts and inv... more President Obama says he wants to fix Social Security, but by ruling out both benefit cuts and investing in real assets, he leaves only one possibility: a massive, unprecedented tax hike.
Free from regulation, the Internet has been a bright spot in our weak economy, with tech sector u... more Free from regulation, the Internet has been a bright spot in our weak economy, with tech sector unemployment at just 3.3 percent. The net neutrality order will start us down the path to crippling it with regulations. A study from NYU found the rule will destroy between 100,000 and 200,000 jobs.
Across the nation, large budget gaps are forcing state governments to make tough policy choices. ... more Across the nation, large budget gaps are forcing state governments to make tough policy choices. While some states are trying to control spending, others are turning to tax increases to balance their budgets. Some state officials are trying to pass the buck for their poor fiscal management by pleading for a bailout from Washington. But a bailout would encourage states to continue overspending, which is the source of the current fiscal mess. The states' mistake was to allow rapid tax revenue growth during the 1990s to fuel an unsustainable expansion in spending. Between fiscal years 1990 and 2001, state tax revenue grew 86 percent-more than the 55 percent of inflation plus population growth. If states had limited spending growth to that benchmark, budgets would have been $93 billion smaller by FY01representing savings roughly twice the size of today's state budget gaps. If revenue growth higher than the benchmark had been given back to taxpayers in permanent tax cuts and annual rebates, rebates could have been temporarily suspended during FY02 and FY03 to provide a cushion with which to balance state budgets. Current budget gaps provide policymakers an opportunity to weed out the budget excesses built up during the past decade. Yet overall state spending continues to grow. After soaring 8.0 percent in FY01, state general fund spending has not been cut in FY02 or FY03 even as large budget gaps have appeared. States should impose tax and spending growth caps to prevent budgets from growing too quickly during the next boom. Revenue growth above a benchmark would be given back in tax cuts and tax rebates. That would prevent spending from increasing too quickly and provide the option of suspending rebates during slowdowns to close budget gaps without the damage caused by tax rate increases.