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Message: <blockquote data-quote="buzzard" data-source="post: 244117" data-attributes="member: 3003">Actually for all this discussion of greed and whatnot, a fundamental issue which causes some of these excesses is ignored. You see, it is relatively easy to fake your earning report if you don't pay a dividend. If you actually have to pay a proportional dividend when making a profit, then the rubber is actually meeting the road. The accountability is inherent in those dividend checks. However the wonders if tax law gets in the way. If you are Joe rich investor, you are likely is a fairly up there tax bracket (say 30%+). Dividends count as income so any share value which is returned to you as a dividend is taxed at this high rate. However capital gains taxes are taxed at a lesser rate (I don't recall the number exactly but it is the 20s). Thus it is in your interest to pick a stock which returns the value to its investors by trying to maximize share price. Thus the boards of directors of many corporations are trying to satisfy their shareholders by doing things to maximize share price. This can consist of profits being folded back into the research or marketing. It can also lead to fraud as in the case of World Com. Simply put dividends are an inherently more honest way of rewarding shareholders. They are also a self guarding system. However the fact that they are one of those double taxed sources of money (the dividend is taxed both on the corporate and shareholder end) makes it so that the tax sensitivity is very high. The best solution to the problem is to tax dividends at the capital gains rate (or heck, go wild and don't tax investments). Buzzard (who gets these kooky ideas out of the Wall Street Journal)</blockquote>

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