WASHINGTON -- U.S. President George W. Bush's new economic agenda is entitled "Taking Action to Strengthen America's Economy," but it is more than that. While some critics claim to have discerned a very narrow focus, the dividend component in particular will have far-reaching implications for the global economy.
The plan proposes to eliminate the double taxation of dividends in the United States. Currently, companies pay taxes on their profits. Then, when the company pays out money as a dividend, these payments are taxed again on the individual level. Of the profits devoted to dividends, shareholders may keep as little as 40 cents on the dollar. Why should that matter internationally ?
In recent years, dividends seemed to have fallen out of favor and investors were mainly counting on share appreciation. However, the bursting of the e-commerce bubble has again brought back a focus on regular dividend payouts by corporations. Even Microsoft announced on Jan. 16 a first time dividend to its shareholders.