How the Dividend Tax Cut Will Work
(2003)
Summary: This is a summary of the study I conducted for the White House on the impact of a change in the dividend tax rate on the U.S. economy and financial markets. You can download a PDF file of the testimony by clicking on the image below or by clicking the following link. Download.
A dividend tax cut would raise the after-tax return on dividend paying assets above that on all other assets. The resulting thermal disequilibrium would lead investors to rebalance portfolios, driving dividend paying asset prices up relative to other assets. The Intrinsic Value of the S&P 900 would rise by 5.1% at a 20% tax rate, and 8.5% at a 0% tax rate, increasing net worth by $481 billion, or $799 billion, respectively. Differential effects vary widely by sector. There are huge potential further gains for companies that increase payout ratios and reduce debt.
I hope that you enjoy the report and welcome your comments.