Seeing It Through
points out a few of the obvious flaws in eliminating taxes on dividends. Here is another one, which also took only a few minutes to think up: senior executives can arrange for their compensation to be in stock of a specially-created subsidiary whose only function is to funnel out large dividends. That switches most of their income from earned income to dividends, so they now pay no income taxes.
This article suggests that some of these problems may be anticipated in the structure of the Bush plan. But it also means that the plan adds more complexity to the tax code than seemed apparent at first.
posted by Alex at 8:01 PM
