There are numerous companies that are sitting on huge cash reserves but do not want to deploy it in such an uncertain market. Another option for these companies is to distribute the cash reserves to its share holders. However, dividends are often not a preferred way of deploying cash reserves because it results in double taxation of these after-tax earnings. Eliminating this double taxation of dividends would be a true economic stimulus since it would get more money into the hands of consumers. In the short-term, it would result in a reduction of tax revenues which should be off-set by spending cuts and elimination of some tax credits (individual and corporate).
the government wouldnt see this as fair because only those that owned these stocks would get the dividends. there would be no redistributuion, therefore, it woulodnt be fair.
This really makes sense becuase then the government is assured of taxing at a (high) corporate rate. When you continue to double-tax dividends, it encourages small businesses to convert to Subchapter S, or some other form and then income is taxed at a possibly lower personal rate.
