Wednesday, July 19, 2006

Progress on Double Taxation of Dividends in Ohio?

We can only hope.

I’ve never bought into the notion that the goal of the tax system should be to punish the successful. Even more suspect is the notion that the poor directly benefit from punishing the successful. Shakier still is the notion that Columbus can competently direct our economy.

But that’s the tripe being pushed by the “Institute on Taxation and Economic Policy”, a group that the Beacon Journal identifies as “advocates for the poor and middle class” (“Advocates for bloated state buracracy and economic stagnation” might be a more accurate label). Speaking as one of the middle class, thanks, but no thanks for this bit of alleged advocacy.

The group claims that reducing the double tax burden placed on dividends will cost 8,000 jobs, and send $300 million out of state. The source of the 8,000 lost jobs is not identified. As for the $300 million, the fear is that it won’t be locally invested, but invested in… better sit down for this… the stock market.

Yup, they might just stash the money in some silly investment somewhere, where it might continue to make some more money. Apparently, the notion that economic growth for the poor depends on the creation of more and better capital per worker has yet to penetrate the craniums of those at the Institute. At the Institute, apparently the economy is a zero sum game.

“The report says that in the first three years, as the tax on capital gains was reduced from 6.555 percent to 3 percent, $537 million in revenue would be removed from the state budget.

The savings to the wealthy wouldn't necessarily be reinvested in Ohio, the research group said. Many capital gains are made from stock market investments and have no relationship to investment in Ohio. The tax benefits could be reinvested in the market, with no benefit to Ohio.

‘they may believe these things, who knows, or they may have
political debts to settle,’ Bob McIntyre, director of the ashington group, said of the proposal's backers. ‘It's not something any respected or reasonable economists would agree with. You have to use common sense.’”
Hmmm. Respectable or reasonable economists not agreeing with reducing the double taxation of dividends? I don’t think that that passes the sniff test. As info, here’s a Treasury Dept. press release listing a number of economists supporting policies to reduce the level of taxation on investments. You might argue that this is a selective list put out to push a particular agenda, but a) that’s exactly what the Institute on Taxation is doing; and b) that doesn’t mean that the Treasury’s list is composed of unreasonable and unrespectable economists.

And, of course, the ‘political payoff’ angle is completely predictable. Can’t muster any real arguments? Imply that your opponents must be corrupt oppressors of the poor.

No space here to deal with the potential local spending increases due to the ‘wealth effect’ of allowing people to keep a greater share of their income. Or with the notion that by increasing the incentives for Ohioans to invest the local economy might actually benefit.

Here’s a Heritage piece on some of the issues, with an emphasis on the most likely victims: Seniors.

Note: Americans for Tax Reform notes that both John Kerry and Jon Corzine were both in favor of elimination of double taxation of dividends, (before they were against them).