No one seems to be writing opinion pieces quite the way I would, so I decided to do it myself.

The name? Taverns are places where one goes to discuss the interesting events and things in the world, so this is my tavern.

I will offer my views on politics, economics, and whatever else strikes my fancy.
I will occasionally publish the entire article from another journal for purposes of causing discussion.

 

Why Eliminating Tax on Dividends is Anti-Growth.

Harry Schwartz in The Hill explains why this is an especially bad time to eliminate the tax on dividends. It means that stocks which pay large dividends will go up and stocks which pay small or no dividends will go down.

Stocks that pay large dividends are older, large, mature companies. They pay larger dividends because they do not need additional funds to grow, or if they do, they can borrow the money. When the economy gets bad, they reduce costs by laying off employees.

Stocks which do not pay dividends or pay low dividends are new companies and companies which are retaining profits to finance growth. Their stock will drop, making it more difficult to obtain equity money to finance growth. These are also the companies that are adding jobs and tend to deal with a bad economy by creating new business prospects.

In other words, eliminating taxes on dividends would protect large, already successful companies while making start-ups and growing companies more difficult. That does NOT sound like a good idea to me.
posted by Richard at 8:43 PM