As envisioned, a person would be able to exclude a substantial share of all stock dividends — probably about half — from taxation. There would be no upper limit on the dollar value of dividends that would be tax free, which means that most of the relief would flow to the largest investors.

White House Aides Push for 50% Cut in Dividend Taxes
The 50 percent cut would cost the Treasury more than $100 billion over 10 years, and the tax benefits would overwhelmingly flow to the nation's very wealthiest taxpayers. Mr. Bush is in favor of some kind of reduction in the tax on dividends, a White House official said, but has not settled on an amount.…

The long-term benefit of a cut in the dividend tax, the officials say, would be to greatly reduce the market distortions of taxing dividends twice — once as corporate profits and once as dividend income to shareholders — while granting tax deductions on debt interest payments. For shareholders, dividends are now taxed as ordinary income at rates of up to 38.6 percent. By comparison, the maximum tax rate on capital gains — the profit made from the increase in value of shares or other kinds of property — is 20 percent.

Many economists are skeptical that a cut in dividend taxes would provide much immediate stimulus to the economy, which has been Mr. Bush's most important justification for new tax cuts. It would be at least a year before shareholders see any extra money, and the measure would not leave extra money in corporate coffers.…

Robert S. McIntyre, director of Citizens for Tax Justice, a research group backed by labor unions, said the entire complaint about "double taxation" was dubious because corporations make such heavy use of legal tax shelters and loopholes.

Although the top corporate tax rate is 35 percent, the average tax rate is only about 15 percent, Mr. McIntyre has estimated on the basis of analyzing corporate tax data.

"Don't worry about the double tax," Mr. McIntyre said. "Worry about the half tax."
http://www.nytimes.com/2002/12/25/business/25TAX.html?pagewanted=all&position=top