An Exclusive Dividend Party -
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Published on: 1/17/2003
Last Visited: 1/17/2003
We got the basic data for this table from Timothy G. Dalton Jr., chairman of New York money manager Dalton, Greiner, Hartman, Maher & Co.He's one of country's leading experts on the history of corporate dividend levels, but he compiled the raw numbers by looking at fine print in corporate annual reports detailing cash federal income taxes paid in 2001.Yields are not relevant to the calculation.
Dalton is bullish about the White House tax bill."This is the most significant tax change for the investor class since Reagan cut the capital gains tax in the 1980s," he opines.Democrats are not enthusiastic, however, because any broad-based investment incentive necessarily benefits wealthier taxpayers.Since a few Republicans will likely oppose the tax cut as it stands, the President needs some Democratic votes to get anywhere.So the final result is likely to include some reduction in the sweeping dividend exemption Bush is seeking.
How did the early commentators get it so wrong about yield?They made two mistakes.
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Dalton calculates that DuPont (see story, p. 54) has only a 24% effective federal tax rate, the mean rate of companies in the S&P 500.The exempt income that this company could hand out doesn't even equal its current cash dividend.By Dalton's calculations, Citicorp's potentially exempt income appears to be not much more than its 72-cent annual dividend.
What could stop the Bush plan?A lot of things.The cost, $30 billion a year on average over the next decade, may be too steep for Congress when other budget needs are pressing.
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