The National Dividend Plan: a public choice analysis

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Virginia Polytechnic Institute and State University

Largely as an outgrowth of the promotional efforts of a single man--an industrialist and publisher, John H. Perry, Jr.--a proposal called the National Dividend Plan has received considerable attention. The Plan involves a proposed constitutional amendment which would prohibit the corporate income tax rate from exceeding fifty percent of net income; make corporation dividends nontaxable income to the recipient; and redistribute funds raised by the corporate income tax to those persons ·voting in the last preceding national election in equal amol.Ults on a per capita basis.

This study represents an investigation into the implications of the Perry proposal by considering each of its most significant provisions. The proposal has a significant impact on federal government revenues and expenditures. Projected federal budget data for the two decades of the 1970s and 1980s permits examination of these effects. The Plan acts to entrench a less than highly desirable form of taxation, the corporate income tax, however at the same time it tends to rejuvenate the profit motive. The National Dividend Plan may be used to substitute, wholly or in part, for numerous federal functions; for example, the income security program. The provision for the nontaxability of dividends may have numerous repercussions in the way individuals and corporations allocate their portfolios. Finally, the distribution of funds to persons voting in the last preceding national election implies that the new voting population would be younger, poorer, less educated, less white, less suburban, and less employed.

Fair evaluation of the National Dividend Plan package requires a clear realization of the existing situation. Thus, the question for the reader is:"Does the National Dividend Plan, considered from a perspective of political and economic feasibility, act to improve the well-being of our society at a reasonable cost or not?" This study does not attempt to answer this question, however, it will aid the reader in evaluating the Plan and answering this question for himself.