From out of the blue comes the possibility that the Senate will today pass a budget resolution that will make it likely there will be a deep cut in the double taxation of dividends, with an outside chance it could be eliminated entirely. This is because a group of Senate liberals may refuse to support any room for tax cuts in the resolution and would thereby kill a proposed amendment by moderates that would squeeze out any room for relief on dividends. That is, by the end of the day, instead of a Senate resolution going to a House conference at $350 billion in tax measures that could not be filibustered, the number could be more than $600 billion. As the House resolution provides for $725 billion in cuts, the outcome may well enable the President to get rid of the double tax altogether. Just a few days ago, this seemed so improbable that administration strategists were thinking they would be lucky to get $350 billion out of the Senate.
Think of it this way: The first $350 billion in the resolution is committed to tax measures -- including acceleration of income-tax cuts -- and ending the double-tax on dividends would itself cost $350 billion (on static analysis). This means the resolution that came out of the Senate Budget Committee at $725 billion may only be shaved in today`s voting to $600 billion. The liberal Senators -- like Hollings of South Carolina and Republicans McCain of Arizona and Chaffee of Rhode Island -- are determined to vote against any measures supporting tax cuts, and are opposing the compromise by Democrat John Breaux of Louisiana to cut the committee figure of $725 billion to $350 billion. I`m unable to sort any of this out as the information came to me only minutes ago from a source who believes the outcome almost certainly will be more positive than had been anticipated. The opposition to tax cuts comes from those who say there should be none until the costs of the war are known. We of course believe the growth and revenue dynamics of an end to the double tax would far exceed the presumed static costs.