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Repeal of Dividends Tax Unlikely

Klotz on Bonds

Home > News and Perspectives > Repeal of Dividends Tax Unlikely

<h3>James A. Klotz</h3>

James A. Klotz

Despite President Bush’s overwhelming approval ratings, it appears that Congress will dramatically reduce his $725 billion tax cut proposal in the weeks ahead.

In order to ensure enough votes in the Senate to pass the fiscal-2004 budget, Sen. Charles Grassley promised Sens. Olympia Snowe and George Voinovich his help in derailing any plan that calls for tax cuts of over $350 billion.

Of interest to the municipal bond market is that a likely casualty in the reduction of the Bush plan would be the repeal of the double taxation of stock dividends. Some market analysts had been concerned that tax-free dividends would weaken investor demand for tax-free bonds.

In order to keep the dividend tax-repeal in the plan, Congress will have to find spending cuts or additional revenue. Neither is considered likely.

James A. Klotz is the President of FMSbonds, Inc.
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Apr 14, 2003

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