This letter ran in the Financial Times on Feb. 11, 2003
February 11, 2003
No question: US needs this tax cut
From Mr John J. Castellani and Mr Paul Beckner.
Sir, Alan Beattie’s report “Dividend tax cut plan faces hurdle in Congress” (February 6) falls short of examining the benefits of President George W. Bush’s proposal to eliminate the double taxation of dividends for American taxpayers.
There is no question that the US needs tax relief to expand the economy at a rate sufficient to create new jobs and reignite consumer demand. From business headquarters to family kitchens, Americans watch with growing concern as the world’s most resilient economy struggles to achieve its potential and people grow more anxious about their own economic well-being. A recent study by The Business Roundtable (BRT) demonstrates that the dividend component of the president’s plan will have the single most positive impact on our nation’s economic growth – increasing the number of jobs by an average of 500,000 a year for the next five years.
PwC, using the highly respected Inforum LIFT model at the University of Maryland, conducted the BRT’s study on the impact of the economic growth proposal. Specifically, the BRT study shows that over the next five years, the dividend component contributes half of the proposal’s resulting growth in both jobs and gross domestic product. It puts money into the pockets of shareholders from all income levels by reducing the taxes they pay on dividends and by increasing the dividends that corporations pay out by an estimated 4 per cent.
These benefits are multiplied further when shareholders start to use this additional money to buy more goods and services, driving up demand for products and leading producers to step up their hiring and capital spending to meet the rising consumer demand.
Repealing the dividend tax will not only increase jobs; it will also make savings and investment more attractive and bolster stock prices and investor confidence. Most Americans know that it is unfair to tax the same profits twice.
The president’s comprehensive economic growth proposal – including the elimination of the double taxation of dividends for individuals – is exactly what the US economy needs. It is the right approach to help spur consumer spending, create jobs and boost investor confidence.
John J. Castellani,
President, The Business Roundtable
President, Citizens for a Sound Economy