Shareholders: “Keep Taxing My Dividends!”

PRESS RELEASE
For immediate release – May 8, 2003
Contact: Betsy Leondar-Wright, 617-423-2148x113

Shareholders: “Keep Taxing My Dividends!”

"Stockholders with modest portfolios, such as myself, are being willfully misled about another tax cut that will only amount to a substantial windfall for the very wealthy. They don't deserve it and we, as a country, can't afford it."

- Peggi Rossi, Sandstone, WV, signer of online Shareholder Rebellion petition

Over 600 shareholders are objecting to an unprecedented step by corporations and the Bush administration to push them to advocate for budget-busting bills that reduce or eliminate the dividend tax. Corporations such as Citigroup, Verizon, and General Motors enclosed inserts with their dividend checks asking shareholders to lobby Congress for the president’s dividend tax cut proposal.

The Bush administration earlier this year proposed entirely eliminating the dividend tax. The Senate Finance Committee is now considering a bill to eliminate it for three years and then restore it, an accounting trick to avoid exceeding the $550 billion limit the Senate set last month. The House Ways and Means Committee passed a bill to lower dividend taxes to 15 percent, less than the rate at which most paychecks are taxed.

Opposition to these proposals has come from some surprising corners. At the Berkshire Hathaway annual meeting this week, vice chairman Charlie Munger said,

"I don't think you can make it so unfair that a man living entirely on dividends will pay zero tax while a cab driver has to work 16 hours a day to barely feed a family. I just don't think it works in a democracy."

At the Responsible Wealth national conference in March, outrage at the corporate inserts for the dividend tax cuts was the talk of the conference. Jody Wiser of Portland, OR, stood up and asked other investors to join her in objecting to this tactic. She asked Responsible Wealth co-director Mike Lapham to organize the Shareholder Rebellion web petition.

The first signer of the petition was Carol Rice, a Washington, DC, therapist, was featured on PBS on “Now with Bill Moyers” as a Citigroup shareholder angry at the dividend insert. Investor Aaron Frank of Santa Monica, CA, not only signed, he also took his funds out of a Schwab account after learning that Charles Schwab proposed the insert campaign.

Not all the 646 signers of the Shareholder Rebellion statement own stock directly. Many own it only in tax-deferred retirement accounts such as 401ks or IRAs, and so don’t pay dividend taxes. Some are more concerned about the harm to their families from the federal government’s failure to aid states and cities in budget crises than about any small savings from a dividend tax cut. For example, Millie Phillips of San Francisco commented:

"Dividend tax cuts might save us a few dollars, but at a time when education budgets are being slashed, we could lose half our income! My husband is a school teacher and he just received a tentative lay-off notice due to drastic cuts. I’d rather see aid to the schools than tax cuts.”

Travel agency owner Tom Thomas of Doylestown, PA, wrote about what real economic stimulus would look like:

“In pressing for this proposal, the president invokes small business owners like me. He claims that the tax cuts will cause us to create jobs and revive the economy. Well, it's true that my business is in a slump, but investor tax cuts will not revive it. What I need are customers with money to spend on travel.”

According to the Tax Policy Center at the Urban Institute and the Brookings Institution, President Bush’s tax cut package would save taxpayers earning over a million dollars $89,509, while only saving $482 a year for taxpayers earning between $40,000 and $50,000, who are more likely to stimulate the economy by spending their tax cut than are high-income people.

United for a Fair Economy Research Director Chris Hartman calls the argument that the dividend tax is double taxation “hogwash.” “In our system, the same dollar is taxed multiple times as it moves through the economy, from an employer to an employee to a store to a gas station, ad infinitum. Singling out dividends for exemption from this process is unfair to those who have little or no dividend income,” he says.

This is not the first time that members of Responsible Wealth (RW) have publicly opposed tax cuts targeted at the rich. Each year since 1998, hundreds of wealthy people organized by RW co-director Mike Lapham, have taken a Tax Fairness Pledge to give away any tax cuts targeted to the wealthy, such as the Clinton capital gains tax of 1997 and the Bush rate reductions in 2001. Over $4 million has been donated to charity, in some cases to tax fairness organizations, by the Tax Fairness Pledgers. RW also organized the Call to Preserve the Estate Tax, now signed by over 1,400 wealthy people and heirs.

Responsible Wealth, affiliated with United for a Fair Economy, is a growing network of over 700 business people, investors and affluent Americans in the top 5 percent of income and wealth who work to promote widely shared prosperity. United for a Fair Economy is a national, independent non-profit that raises awareness of the damaging consequences of growing economic inequality.