[Congressional Record (Bound Edition), Volume 149 (2003), Part 8]
[Senate]
[Pages 10685-10686]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            DOUBLE TAXATION

  Mr. CRAIG. Mr. President, since we are still in morning business, I 
will speak a few more moments until another of my colleagues asks for 
time.
  Because it is time sensitive, I thought I would talk for a few 
moments about the issue of double taxation of dividends that is 
currently before our Finance Committee and certainly is a major 
component of our President's stimulus package.
  Some weeks ago, before the Special Committee on Aging that I chair, 
we looked at this issue as it relates to older Americans. I found it 
fascinating that 71 percent of all taxable cash dividends are received 
by Americans age 55 and older. Dividend income benefits older workers 
and seniors who worked very hard throughout their working life, 
sacrificed, saved, and invested in stocks, and in their senior years 
were most assuredly concerned that those stocks were dividend 
producers.
  Unfortunately, dividend income is taxed twice--we know that--once at 
the company level and then again at the individual level. In effect, it 
certainly punishes older Americans for taking personal responsibility 
in their lives to save and build a little nest egg as a part of their 
total retirement.
  This pie chart demonstrates that very clearly. Dividend penalties are 
received by more than half of all of our seniors. This pie chart shows 
that 52 percent of seniors receive taxable dividends. Nine million 
seniors are age 65 and older, many on fixed incomes, and rely on a 
little dividend income. The average dividend income for these seniors 
is over $4,000 a year, and that is very significant to a retired person 
living on a fixed income.
  That is one of the reasons our President put this idea forth. But it 
is only one reason. The economists who we had before the Special 
Committee on Aging talked about a lot of other issues embodied in this 
concept.
  When our President first proposed it, there were a good many who 
said: Why this? How could this be stimulative to the economy? As those 
critics began to examine what our President proposed and put it in a 
computer model to see what kind of stimulative effect it might have, 
they began to recognize that it might have considerable effects.
  Economists are now suggesting it would reduce the cost of business 
investment by 10 to 25 percent. In other words, the cost of capital 
that businesses require to build plants and create jobs could be 
reduced by as much as 25 percent. And, in fact, they would be removed 
from basically a 71-percent

[[Page 10686]]

net tax bracket in which dividends or profits of corporations find 
themselves.
  I find it interesting that we are the country of the free enterprise 
system, we are the country of big business, in which the rest of the 
world wants to invest, generating and creating the jobs on which so 
many of our workers depend--and at the same time we tax our profits 
from these businesses at nearly 71 percent. We tax them in combination 
twice, once at the corporate level and once at the individual level.
  We are now beginning to find increased business investment that would 
result and have a tremendous stimulative effect on our economy and 
would boost the technology side of spending in our country. That is one 
of the very areas that help is so directly needed.
  Most technology companies depend on purchases made by the industries 
most likely to pay dividends. It is the growth generating effect of the 
two in combination that is so important. These industries include 
manufacturing, banking, insurance, transportation, communications, and 
other sectors. All of them currently are flat or growing very slowly.
  The strength of these industries depends on boosting their business 
investment. If these industries are strong and are buying the new 
technologies of the country, then our technology side also begins to 
strengthen. Of course, increased use of technology by workers improves 
worker productivity.
  You have to get the marketplace working and you have to get 
investment back into the market to increase productivity. Productivity 
is the ultimate source of economic prosperity.
  While it will tremendously benefit seniors--and these are statistical 
facts on which we all agree--what we are really talking about is jobs. 
What the American people are questioning and asking for right now is 
job creation, and we are playing politics with an awfully important 
issue that can have the effect of stimulating the economy, bringing 
investment into the economy, and creating those jobs that the American 
people are extremely concerned about today. Technology, the application 
of investment into these fields, ratchets upwards and does exactly what 
we want it to do, producing higher levels of productivity and driving 
wages higher for all of our citizens. It is an economic combination 
that works well.
  It is interesting that the economic critics are quiet because they 
have done their modeling and they have seen the positive, job creating 
effect of ending the double taxation of dividends. It is now the 
political critics who step forward saying we cannot do this kind of 
thing. Of course, if one is a critic of the issue and their political 
advantage requires that somebody ought to fail who has put this issue 
forward, then denying this economy the ability to grow is certainly in 
the forefront of their concern.
  The argument is deficits and spending, that government does not 
create jobs, it just spends a lot of money. Yes, ending the dividend 
penalty can have an effect, and I talked earlier this morning about the 
effect of technology and the application of technology once it is well 
developed in areas where the public sector cannot go.
  That ultimately will create jobs when it is applied in the private 
sector, but certainly the kind of spending we are talking about as it 
relates to government is not what generates jobs. What will generate 
jobs and what most of us have come to realize can generate jobs--is an 
effective economic stimulus package that does not double tax, that does 
not penalize profit-seeking, and that does allow a reduction in the 
cost of capital by as much as 10 to 25 percent.
  In my State of Idaho, employment decreased by 6,000 workers last 
year, and we are not a big State. Earlier this year, Micron, one of my 
larger employers, announced a plan to lay off 1,000 people. Zilog, a 
California company employing a number of people, closed its doors. The 
dividend taxation is, in part, something that can change this equation 
effectively and, I think, responsibly. I hope the Finance Committee can 
bring a stimulus package to the floor that has the elimination of 
double taxation as a centerpiece to the total package that we will be 
voting on here in the next couple of weeks.
  I see my colleague, the chairman of the Judiciary Committee, the 
senior Senator from Utah, is now on the floor. I will yield the floor 
so he has adequate time to speak. I thank my colleagues for listening.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I thank my colleague for his excellent 
remarks. My colleague from Idaho has been a formidable force in the 
Senate for many years and he has done a terrific job, and these 
particular remarks I agree with and associate myself with.
  Mr. CRAIG. I thank my colleague.

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