New government plan may hurt tech industry

President Bush's plan to nix taxes on stock dividends, part of his sweeping $674 billion economic stimulus package outlined yesterday, is not sitting well with a number of tech companies.

Behind public statements supporting the plan lies tech companies' secret desire to kill it. "Privately, however, several industry lobbyists in Washington vowed a congressional fight. They say the measure offers little to stimulate corporate technology spending that is essential for the industry to pull itself out of a deep swoon that is in its third year," Washington Post reporter Jonathan Krim wrote.

Richard Carlson, an economist at Spectrum Economics in Palo Alto, is one critic who doesn't think the plan will stimulate growth for tech companies. "It's just a loser," Carlson told The San Jose Mercury News. The newspaper summed up his critique: "By giving investors incentives to buy the shares of other companies that do pay dividends, the plan could create even more of a drag on Bay Area technology stock prices."

During the dot-com heyday and in the current downturn, top tech companies have hoarded billions of dollars of cash instead of paying dividends, preferring instead to reinvest their cash in company investments and stock purchases.

News source: The Washington Post

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