NYTimes -- The Politics of Portfolios

How do the benefits distribute for eliminating a tax on dividends?

The Center on Budget and Policy Priorities, a liberal research group, cited an analysis of Federal Reserve data today showing that 85 percent of the value of stocks and bonds was held by the top 10 percent of the income spectrum in 1998, the latest year for which comprehensive data is available. Citing I.R.S. data from 2000, the group said 22 percent of taxpayers with incomes under $100,000 reported any dividend income, while 72 percent of filers between $100,000 and $1 million and nearly all filers above $1 million reported dividend income.

A dividend tax cut is not an economic stimulant. It leads to some reshuffling of very large portfolios and may reward more investments in established companies and utilities. The US tax code recently had a limited tax exemption on dividends. The analysis was it had no meaningful effects. It does provide a reward to the very rich and to old established companies and their owners.