NCPA - National Center for Policy Analysis


January 31, 2008

Any discussion of fiscal stimulus should at the very least include provisions for accelerated depreciation and seek a long-term solution to what currently ails the U.S. economy.  A simple first step would be to make permanent the 15 percent tax rates on dividends and capital gains President Bush and the Congress passed nearly five years ago, says Jason Desena Trennert, a managing partner and chief investment strategist at Strategas Research Partners LLC in New York.

President Bush's tax cuts have been an unqualified success for both the American taxpayer and the U.S. Treasury:

  • Capital gains tax revenues have nearly tripled since 2002 and are more than double the levels expected by budget forecasters after the 2003 tax cut.
  • A similar situation occurred after the 1997 and 1981 capital gains tax reductions.
  • Conversely, after the 1986 capital gains tax increase, capital gains tax revenues remained depressed for nearly a decade.

The number of S&P 500 constituent companies paying dividends has grown substantially as well, an important development in bolstering corporate governance and confidence in our financial markets in the aftermath of the accounting scandals that damaged the reputation of America's public companies earlier in the decade.

  • More than 50 percent of American households and more than 70 percent of registered voters own stocks in one form or another, and many older Americans have come to rely on dividend income as an important part of their retirement plans.
  • Dividend income has increased more than 65 percent since the 2003 tax cut was put into place, growing at an annualized rate of 11.8 percent per year.
  • To place this number in context, in the 15 years before the tax cut was put in place, dividend income increased by less than half of that rate, at 5.5 percent, despite the stock market boom of the 1990s.

Source: Jason Desena Trennert, "Time To Apply The 15% Solution: Making Bush Tax Cuts Permanent," Investor's Business Daily, January 30, 2008.


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