JIMMY–AND THE NEW YORK TIMES–ONCE LIKED IT, TOO: When you hear Democrats tut-tutting President Bush’s plan to reduce taxes on dividends, remember this article by Bruce Bartlett:
In 1976, Democrat Jimmy Carter made elimination of the double taxation of corporate profits a key campaign theme. “We presently tax corporate income when it’s earned and we also tax dividends to shareholders,” he said. “I would favor taxing income only once,” Carter told Fortune magazine.
When President Carter took office in 1977, he reiterated his goal of taxing corporate income only once and had the Treasury Department examine the issue. He received support from many voices of liberalism in this effort. For example, Americans for Democratic Action called for abolition of the corporate income tax at its convention in May. On September 11, the New York Times editorialized in favor of this action.
Unfortunately, Carter failed to include any proposal for reducing or eliminating double taxation in his 1978 tax-reform plan. The reason, interestingly, appears to have been opposition from the Republican-leaning corporate community. According to an article by Robert Samuelson in the National Journal in September 1977, businesses basically killed the idea.
According to Samuelson, corporate executives suddenly had a lot of problems with the idea of eliminating double taxation once confronted with its possible reality. Some worried about increased pressure to pay out dividends. This especially concerned small businesses that normally don’t pay dividends. Executives also feared a loss of control over retained earnings, which they could invest as they chose. And they saw many specific tax breaks as better for them.
Bartlett says that “President Bush is right to try and relieve the double taxation and overtaxation of corporate income. Not only will it increase the economy’s long-term growth potential, but it could provide short-run stimulus by boosting the stock market.”
And besides, he can point to Jimmy and the Times’ blessing!