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Tags: Spetrino | tax | deductions | corporations

To Boost Job Creation, Make Dividend Payouts Tax Deductible

By    |   Friday, 31 August 2012 07:53 AM

In last week's blog, I talked about how to cut taxes for small business owners, who are the backbone of this country.

There is also talk of cutting the corporate tax rate since America has one of the highest corporate tax rates in the world today. The problem is that there is no guarantee that doing so would lead to a massive amount of jobs. I do agree that it would help, but I have an even better solution.

Make 25 percent of all dividend payments by C corporations tax deductible, provided that they use at least 60 percent of that money to hire U.S. citizens for new jobs by the end of the calendar year.

Editor's Note: Small-Town Ohio Accountant Uses Simple Forgotten Secret to Help Investors Pocket Millions

Let me explain.

Johnson & Johnson pays almost $6 billion in dividends to its shareholders and does not receive a tax deduction for those dividend payouts.

If the tax deduction on dividend payments were to be implemented, J&J would receive up to 25 percent — that would be almost $1.5 billion — in tax credits if it spent at least 60 percent, or $900 million, hiring U.S employees in new jobs.

See, if you don’t put the restriction of the jobs being “new,” then these companies would just give raises to present employees, and that doesn’t tackle our unemployment problem.

This would help stockholders, as the company would be more productive. It also would help many seniors and those living on dividend income by providing more incentive for companies to pay higher dividends.

Senior citizens have felt the major brunt of the low interest rate environment caused by the Federal Reserve and the anemic, neglected economy.

Think about how many seniors retired with $300,000 or $400,000 and wanted to live off their 5 percent interest in a money market account and Social Security.

That interest income has been virtually wiped out.

This plan would also help businesses through increased sales.

In addition, think of the millions of discouraged or unemployed Americans who would be getting jobs and paying taxes. It would help state and local governments, which have been burdened with unemployment payments.

And, it would dissipate the overall fear that has been pervasive in the entire economy and is depressing consumer spending.

Editor's Note: Small-Town Ohio Accountant Uses Simple Forgotten Secret to Help Investors Pocket Millions

Also, the wealth effect would cause a massive spike in these blue-chip stocks and encourage Americans to buy them, instead of gambling on high beta names, many of which are selling at a price much higher than their true worth.

Make sense? However, most politicians have never had a job in the private sector and one well-known politician recently said creating jobs from the bottom up is the way an economy is supposed to grow.

I don't know about you, but most folks get a job from someone richer than them who has money to invest in a business, not someone much poorer than they are.

Call your congressman and suggest this, please.

Next week be ready for part 3.

About the Author: Bill Spetrino

Bill Spetrino is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the Dividend Machine. Discover more by Clicking Here Now.

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Friday, 31 August 2012 07:53 AM
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