Smoke and Mirrors Tax Relief

The President's proposed Tax Break on Dividend Income is smoke-and-mirrors economics in its highest form. My retirement funds are in tax-deferred 401(k) and conventional IRA plans. These plans collect dividends now, but do not pay taxes on them. So there is NO double taxation, the principal reason advanced by the Bush Administration to abolish such taxation.

When I withdraw money from my IRA or my 401(k), I pay taxes as ordinary income on the withdrawals. That's the way these retirement savings programs work. Contributions, capital gains, and dividends are all taxed. That's where the double taxation occurs. The President is not proposing to exempt any of THESE dividends from taxation.

The only people who will benefit from removing individual taxes on dividends are the very wealthy who have large holdings in taxable brokerage accounts. We, the working middle class, put the overwhelming majority of our savings into our tax-deferred retirement plans. We will see no tax reduction at all.

In short, the working middle class sees no benefit. Only the very wealthy do.

Now you see tax relief. Now you don't.

Ed H