Now About Those Dividends...

But Lamoureux's basic point - namely, why are corporations paying fat dividends to shareholders, even as they plead for fiscal relief - got me thinking more broadly. Couldn't the same complaint apply to the whole of corporate Canada? After all, in 2004 Canadian companies paid out $62 billion in dividends to shareholders - an all-time record. That's 328 times more than Bombardier paid. Corporate dividends last year totalled more than Ottawa's old age pensions, EI benefits, and child tax credits all put together. Indeed, it's not far-fetched to think of dividends as a highly lucrative income security program for financial investors. Worried that another meltdown could knock the wind out of your portfolio? Well, getting a sweet dividend, year in and year out, sure eases the occasional cold chill over equity prices. At last check, the average dividend yield for the TSX/S&P 60 was significantly higher (at 1.7 percent) than average Joe or Jane earn on their little savings accounts. And that's just the appetizer, of course: what really motivates investors, the prospect of rising stock prices, is all extra. And unlike Joe and Jane's savings accounts, investors get a juicy tax break - the dividend tax credit - which reduces taxes paid on dividends by as much as one-quarter. The value of this credit is incredibly concentrated at the top of the income ladder: it costs the federal treasury about $1.5 billion per year, three-quarters of which is claimed by the richest 10 percent of taxpayers. But living high off the hog on dividends hasn't stopped investors (nor the companies they own) from begging for more special help from Ottawa. Business lobbyists want a larger dividend tax credit. Incredibly, they argue that this would level the playing field with income trusts (another offensive tax loophole). That's like saying that since Peter successfully robbed a bank, Paul should be allowed into the vault, too. continued here: http://www.caw.ca/news/factsfromthefringe/issue98.asp