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01.14.03 Dear Taxpayer:
I know it's been a tough year for you folks in the investor class. I'll bet you didn't even know there was an investor class, let alone realize that you are members of this elite club. Well, between you and me, we just made that term up because we needed a target audience. You know, a group of people that would drive the rest of you to understand what we are trying to do for you. Yes, what we do is for you, the average Dick and Jane, even if if it seems like it is for only a very few.
Before, we go too far in explaining ourselves, let me suggest to those that are quick to criticize our economic stimulus package, that it is not wrong. It is the perfect plan for the perfect moment in our economy. We understand that when the previous President was in office, you correlated his tenure with the bull market. That's because most Democrats wouldn't give Reaganomics the full credit it deserved. That's right. It took all those many years for the fruits of that great president to take root and blossom and it happened at the exact moment that a Democrat was in office. Go figure.
Now we realize that this association of good economy, good president won't go away. We have been unsuccessful in distracting your attention away from the stock market by our escalation of the war effort. We have been unable to slide the expanded deficits for that effort through as though we had a blank check from the world to protect the world fro itself. My friends, the blank check is from you, thank you very much. But you are a fickle group. You want your investments as secure as your homeland and we figure, that if we can protect you from Saddam. we can protect you from further loses in the equity market.
This is the right stimulus for the right group of people. In our speech last Tuesday, we spoke about the folks with over-extended credit card debt. We spoke to the folks living paycheck to paycheck and how our plan to cut double taxation of dividends would help. Perhaps you need a little lesson on how this might work.
There are over 7000 companies that payout dividends. Now for those of you less versed, a dividend is basically an incentive that keeps shareholders interested in the company. Companies have the right to increase or decrease these portions of the profits at their leisure, but it isn't always a good idea. Shareholders like this portion of the profits paid to them and not kept in the company coffers for some high and mighty CEO to come along and squander. Not only that, but companies send a clear signal that they are doing just fine when they fork over a dividend even if they need to carry debt as a result. I'll bet you didn't know that dividend payouts are on the increase. For all of 2002, dividends paid by the top 500 companies as tracked by Standard and Poors actually increased 2.1%
So we looked at this idea of double taxation and saw that there was a major problem that was easy to solve. We realized from the companies we talked to, that paying tax on income is okay but they were forced to do it before the dividend was paid. Then they divvied up the remainder of those taxed profits to the shareholders who are then taxed again.
The popular argument over the wisdom of this comes from those folks who will get no tax break whatsoever from this proposal. I know that our tax proposal doesn't offer relief from dividend taxes in your individual retirement plans, where you folks claim the lion's share is distributed. If we had included that provision it would have watered down the immediate stimulus that it will give to the investors that really matter.
Big investors will use the money to reinvest in the economy because they should. Stocks would rise and you know the old adage, "all the boats will rise." These high rollers, the investor class, are going to make sure that all of that newly freed capital will flow back into markets that need it. That will stimulate the economy. We're sure of it.
So let's review why you should be for this proposal. Companies would get a tax break, whether they need it or not. They didn't get any breaks in my tax cut in 2001 and now they deserve one. The speedy write-off of capital equipment should get those companies back into the mood to buy stuff even if they are at full capacity utilization. If we had our way, we would make corporate purchasing so much of an advantage, companies might actually regard equipment acquisition as a sort of tax haven, better, yet, a shelter.
There is another way for companies to save money that we feel will stimulate the economy. If these big players pay no taxes, they get no break. If they pay taxes and no dividends, they would pay less because of lower capital gains. Either way, corporations get the break we denied them a year ago. And they should.
Whether you benefit directly from this tax cut is not really important. We believe that we can predict your behavior and this is what will happen. There will be a lot of squawking about the deficit and how much this is going to cost but we will get it all back. You folks will start saving more just because there will be incentives to take advantage of the high returns in the stock market. When that happens, companies will get more money to work with, buy more stuff, employ more people and after all of those chips fall in the right place, nothing but growth. That will increase the taxes we collect and that will offset any dividend tax loss.
And then you'll thank us.
Yours truly,
Previously, Dear Shareholder
Previously, Dear Citizen
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