[Congressional Record Volume 149, Number 2 (Wednesday, January 8, 2003)]
[Extensions of Remarks]
[Page E44]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       INTRODUCTION OF THE DIVIDEND PAYMENT INCENTIVE ACT OF 2003

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                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                       Wednesday, January 8, 2003

  Mr. PETRI. Mr. Speaker, today, I am introducing legislation to 
authorize a deduction from corporate income for dividends paid to 
stockholders. This legislation, the Dividend Payment Incentive Act of 
2003, will provide benefits to shareholders, public company managers, 
and the broader U.S. economy. Passage of this bill is important for 
many reasons, including:
  This legislation will end the double taxation of dividends. 
Currently, corporate income is taxed at 35 percent and then 
shareholders also pay personal income tax on any dividends received. An 
investor in the 27 percent tax bracket nets less than 48 cents for each 
dollar of earnings a public company allocates to dividend payments.
  Current tax policy provides a disincentive for corporations to 
transfer earnings to shareholders, and dividend payments have declined 
significantly. In fact, many corporations make no dividend 
distributions.
  Clearly, the expectation of receiving regular dividend payments from 
profitable companies can persuade investors to invest money in our 
equity markets. It has been estimated that dividends comprised half of 
the average return to shareholders in the decades before 1990. 
Encouraging managers to make dividend distributions can help to boost 
overall stock market performance by providing a very real incentive for 
investors to put their hard-earned money back into the stock market.
  Because corporate income is taxed at a single 35 percent rate and 
personal income is taxed at marginal rates ranging from 15 to 38.6 
percent, ending the double taxation of dividends on the corporate tax 
side will provide a fairer distribution of the benefit to taxpayers at 
all income levels. This stands in sharp contrast with proposals to 
reduce the personal income tax on dividends received which will give a 
greater benefit to taxpayers paying higher marginal tax rates.
  Income allocated to dividends is fully taxed while interest payments 
are deductible. This uneven treatment of different financing vehicles 
distorts the corporate decisionmaking process by creating a distinct 
financial advantage for borrowing. Allowing a deduction for dividends 
paid will equalize this treatment and enable corporate managers to 
consider the full range of debt and equity financing options.
  The time has come to end the double taxation of dividends, and it 
should be clear that enacting this reform through a corporate side 
deduction will provide the greatest benefit to the broadest array of 
taxpayers.

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