Kent Conrad: “A prominent Republican economist commented on this scheme today, calling it, "The Dividend Fiasco." This scheme would…”

“A prominent Republican economist commented on this scheme today, calling it, "The Dividend Fiasco." This scheme would exempt exempt one-third of dividends this year, two-thirds the next year, and all of them in the third year, and then sunset the whole proposal after that. Again, this is an economist whom Republicans have called before the Congress repeatedly to testify on their behalf. Here is what he says about that scheme: Think, for a moment, of the likely wacky effects of such a plan. If a firm pays you a dividend next year as opposed to this year, then you will save 33 percent on your taxes. With rates falling so sharply, it would be positively irresponsible for a firm to pay any dividends at all until the rates are at their lowest. Then, in 2005, the rate is zero for only one year. Thus, a firm will have an incentive to pay dividends that it might have planned to pay in 2006 in 2005 as well. So under the administration's proposal, dividends would go as close to zero as firms could manage for a few years, spike to their highest level in history, then drop sharply for some time.”