The charge that this policy would only benefit the rich is patently false. A recent Zogby poll shows that a substantial 59 percent majority of investors has a portfolio valued at less than $100,000. In addition, 28 percent of investors earn a modest $50,000 to $75,000 a year; another 19 percent earn $35,000 to $50,000; and 7 percent earn less than $35,000. According to Zogby, ?The majority of investors earn less than $75,000. . . . This helps explain why old-fashioned [class-warfare] populism does not work in political campaigns nationwide.?
Steady dividend flows over time reduce equity risk and add enormous investor protection for retirement and other purposes. So what we?re seeing now is a return to the old-time religion of investing for both dividends and capital-gains returns.
According to the American Shareholders Association, investor wealth has increased $2.2 trillion, or 25 percent, since May 20, 2003, the start date of the Bush policy. So far this year, 161 of the S&P 500 companies have raised or initiated dividends. According to Standard & Poor?s, year-to-date dividend-paying issues in the S&P 500 index are averaging a 4.8 percent gain while non-dividend payers are down 3.5 percent.
Professor Jeremy Siegel of the University of Pennsylvania calculates that stock market returns including dividends have produced a 7 percent annual increase (adjusted for inflation) over long periods of time. But dividends fell behind in the last two decades because capital gains were taxed at a lower rate. Now, however, with a sharp reduction of the double-tax on dividends, dividend issuance is more efficient, with corporate payout policies more often based on the economics of a decision than just the tax consequence. Stock buybacks now have equal footing with dividend issuance. At lower tax rates, CEOs also have an incentive to pay out more cash to shareholders, rather than build internal empires or make unwise investment decisions.
In effect, the new law democratizes corporate governance. It puts real financial power into the hands of the shareholder constituency and removes it from the corpocratic front office.
Bush critics -- especially Kerry and Edwards, who wish to overturn the Bush policy -- fail to understand that reducing the double and triple taxation of investment capital is a business-funder, job-creator, and economic-grower. Simply put, capital is the best friend of both businesses and workers.
Bush?s policies make more capital available by reducing its after-tax cost and raising its post-tax investment return. When it is more profitable after-tax to invest, the mighty investor class will do so. And by supplying ever more capital to business and the economy, 90 million investors will expand America?s virtually unlimited potential to grow, create jobs, and prosper.