Security Futures Tied to Dividend Whipping Post

Cynics seldom are disappointed about the course of human events. This past August I wrote a column summarizing the labyrinthine tax treatment of single-stock futures in which my concluding line was: At least we can take solace that once tax law is written, it's pretty much left alone, isn't it?

Not even five months later, the administration decided to take me up on the deal and propose a set of tax changes that will have some truly profound impacts on all of our investments. In general, I applaud the president's proposals and will continue applauding until my own little vision of a tax utopia (how's that for an oxymoron?) is reached. Specifically, I propose:

A complete elimination of the corporate income tax. Corporations don't pay taxes, they collect taxes. The tax is paid by shareholders, employees, customers and suppliers in proportions that vary widely from company to company and from industry to industry. Moreover, it is hugely expensive to administer and invite the sort of chicanery that produced the Enron/WorldCom/Andersen fiascoes;

Full deductibility of losses from ordinary income. The $3,000 limit on loss deductibility against the full taxability of gains doesn't pass the fairness standard of a children's playground;

Complete elimination of capital gains taxes, or at the very least, elimination of the economically meaningless distinction between long- and short-term gains. Income is income regardless of its source or how long it took to produce, and if we are going to tax asset appreciation, let's at least adjust it for inflation and tax it as ordinary income;

Failing the passage of the first point -- and I'm not holding my breath -- end the double taxation of dividends, not at the individual level, but at the corporate level. This will treat the costs of debt and equity capital consistently for the corporation. As an aside, the two forms of capital can never be treated equally, as they represent different risks and claims legally.