Testimony given before the Special Committee on Aging

Mr. Chairman and members of the Committee, thank you for this opportunity to testify. My name is Dan Mitchell and I am a Senior Fellow in Political Economy at the Heritage Foundation. The views expressed here are my own.

President Bush has proposed to eliminate the double-taxation of dividends. Under his plan, businesses will pay tax on corporate income, but individual stockholders no longer would have to pay a second layer of tax on that income when it is distributed in the form of dividends. This proposal is good for America, and it is good for seniors.

The President is addressing a very serious problem. The internal revenue code routinely imposes extra layers of taxation on productive behavior such as saving and investment, and the double-taxation of dividends is just the tip of the iceberg. Capital gains taxes are a form of double-taxation, as is the death tax. Interest payments also are double-taxed, and the 1993 tax bill even instituted an extra layer of tax on Social Security benefits.

Removing or reducing double-taxation will lead to more jobs and higher living standards. These policies will make America more competitive. Eliminating extra layers of tax will simplify the tax code. Perhaps most important, ending double-taxation is the right thing to do. People who contribute to our nation’s prosperity by saving and investing – and this certainly includes many of the elderly – should not be punished by the tax code.

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