By James L. Martin

Just over 25 years ago, when my 86-year-old mother was a sprightly 61, and working full time, Jimmy Carter called for the elimination of federal taxes on dividend income, as President Bush has just done.

For the record my hale and hearty 103-year-old stepfather was then 78 and retired.

That was long before the great surge in stock ownership spawned by several Reagan-era tax changes, which enabled millions of Americans to set aside money for their senior years in individual retirement accounts (IRAs) and 401(k) investment plans. So President Bush’s proposal to end the double taxation on dividends should be welcome news to all of the estimated 84 million Americans who own stock, either directly or in retirement accounts. If they have children or stay-at-home or retired spouses, it should be good news to them as well.

As a group, senior citizens should be the most thankful of all. Back in Jimmy Carter’s day, my mother and stepfather would have been young enough to jump for joy; now, living at home in Okeechobee, Florida they’ll have to limit themselves to polite applause.

Properly understood, the dividend tax is really a double tax. When a company earns a profit, it is taxed on that profit. When the company distributes some of those profits to its shareholders in the form of dividends, the shareholders are required to pay taxes on the exact same money.

In his Jan. 7 speech to the Chicago Economic Club outlining his tax plan, President Bush said “Double taxation is wrong.” And President Bush is right.

“Double taxation falls especially hard on retired people,” the President noted. “About half of all dividend income goes to America’s seniors, and they often rely on those checks for a steady source of income in their retirement.

“It’s fair to tax a company’s profits,” the President said. “It’s not fair to double tax by taxing the shareholder on the same profits.”

Back in Jimmy Carter’s day, the proposed change, which he never pushed in Congress as President, was vigorously supported by liberal interest groups, the self- proclaimed champions of the little guy. Today, the liberal establishment is so wedded to the rhetoric of class warfare that they condemn the proposal as a “sop to the super rich.”

Yet, analyses of dividend distribution data by Scott Hodge of the Tax Foundation and Norbert Michel of the Heritage Foundation indicate that most taxpayers receiving dividend income are anything but rich.

As Hodge wrote in an article for the Jan. 8 issue of National Review Online, “of all taxpayers that claimed … dividend income in 2000, nearly half (45.8 percent) earned less than $50,000 in adjusted gross income (which includes dividends), and almost two-thirds, 63.8 percent … earned less than $50,000 in just wages and salaries.” Even under the most elastic definition of rich, this ain’t them.

Hodge noted that 34.1 million tax returns reported dividend income in 2000, representing some 71 million individuals. “Clearly, dividend tax relief would benefit far more than just the top income groups,” the Heritage Foundation’s Michel added.

The President’s tax reform plan includes additional good news for senior citizens as well, including the elimination of the hated “death,” or estate tax, which reaches into the grave to rob families of their rightful due.

Once again, the President’s critics denounced the proposal as a sop to the rich. But I say it’s time to dismount from that dead horse. The truth of the mater is that the rich have the resources to hire fancy lawyers and accountants to set up trusts and foundations to avoid the tax. So the burden falls mainly on the owners of small family businesses and family farmers.

No age group is hit harder by double-taxing dividends than seniors, who have scrimped and saved for decades so they can support themselves in their golden years without being a burden on either the taxpayers or their children, who have problems enough of their own.

So Thank You, President Bush. We owe you one.

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James L. Martin is President of the 60 Plus Association, Arlington, Virginia, a national senior-citizen advocacy organization.