Steven A. Bank (UCLA) presents Dividends and Tax Policy in the Long-Run at Northwestern today as part of its Tax Policy Colloquium. Here is the abstract:

There is a long-standing debate as to whether changes in shareholder-level taxes have an effect on firm dividend policy. The traditional view is that tax changes influence dividends, while the new view is that there generally is no such effect. In support of the traditional view, recent observers point to the rise in dividends following the reduction in the tax rate on dividends in 2003. In fact, the resurgence in dividends has been so strong that President Bush has made it his top legislative priority to permanently extend the tax cut, which is currently set to expire at the end of 2008. The assumption is that the rise in dividends — and any associated economic and corporate governance benefits — will only continue if the lower rate is made permanent. This Article challenges that assumption. Using finance theory and empirical evidence from other countries, this Article shows that the relationship between dividends and taxes over the long-run is more complex than dividend tax cut proponents suggest. Because the 2003 tax cut was only a temporary cut, making it permanent may actually have an effect that is opposite of what is intended.

The Colloquium will be held at 4:00 p.m. CST in Rubloff 339 at Northwestern Law School.