Tax on the dividends

Kenneth Mason (BDN op-ed, May 15) has it right. Instead of individuals getting tax-free dividends, it would make sense to allow corporations to expense dividends, being subject to the standard accounting practice of requiring a corporation to pay dividends from accumulated profits.

Such a tax provision would provoke corporations into paying out accumulated profits or investing in goods and services that provide expansion. Either choice promotes the economy: Dividends require the recipients to pay income tax, thus reducing the deficit, while expansion increases jobs by increasing the work force plus the buying of machinery or other hard assets.

If the corporation chose to hoard profits, that would result in tax on the hoarded profit. The result would be a double tax if the corporation ever used that money for dividends.

Also, individuals in high brackets would have to pay tax at their rate on the dividends or mitigate that by investing in ventures that promoted jobs and the purchase of goods and services. The little guy would have to pay tax on the dividends at his low tax rate, and if he spent the money it would help the economy. If he saved it, it would decrease the disparity between the rich and the poor.

Donald V. Organ

Northport