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Survey Finds Division on Economic Stimulus Package

In the First Quarter of Stable Times, readers were asked to participate in a brief Internet survey on President Bush's economic stimulus package. Like the Washington debate, participants in the survey were strongly divided.

When asked which is the more pressing economic concern, 38 percent said cutting taxes to stimulate the economy. The majority, 63 percent, said controlling the federal deficit to help keep interest rates low was a more pressing concern.

On the elimination of taxation of dividends for individuals, our survey participants squared off with 50 percent supporting the elimination of the dividend taxation and 50 percent opposing elimination. They were also evenly split as to the fairness to all taxpayers on the elimination of dividend taxation/

The half who supported ending taxes on dividend payments to individuals gave three reasons for their support:

• 25 percent believed it would boost the stock market;
• 25 percent said it would increase the money they had to spend;
• 50 percent said it would increase the money they had to save and invest.

Although only half of the survey supported elimination of the dividend tax, 75 percent thought it was unfair to tax dividends twice.

Additionally, it was unclear if the group would change their investment behavior as a consequence to a change in the tax treatment of dividends. They gave conflicting responses. 75 percent said they would hold stocks that paid a dividend in taxable account while 88 percent said they were likely to hold stocks that pay dividends in tax-deferred accounts.

Interesting, all indicated that they currently saved and invested. No one who participated in the survey said they did not or could not save or invest.

However, the group sent an inconsistent message on tax-deferred vehicles and President Bush's new savings vehicles. 50 percent said they were only willing to save on a pre-tax basis. Further, 75 percent said the primary reason they invest in a defined contribution plan is the tax deferral. The remaining 25 percent cited the primary reason they invested in a 401(k) plan as the employer match.

The group vacillated when asked if they would invest in President Bush's new after-tax savings vehicles. 63 percent said they would be interested in the proposed after tax savings vehicles such as the lifetime savings accounts, retirement savings account or employer savings account.

When asked which investment vehicles they used, 100 percent reported using traditional IRAs; 25 percent used Roth IRAs (after tax contributions); 75 percent reported using defined contribution plans and 37 percent invested in 529 college savings plans.

Further, when asked if they contributed the maximum amount permitted in these tax-deferred vehicles, 37 percent reported maximizing their contributions to traditional IRAs; 12 percent to Roth IRAs; 71 percent to defined contribution plans; and 12 percent to 529 college savings plans.

80 individuals participated in the SVIA Economic/Tax Poll. The majority, 75 percent were not SVIA members. 25 percent of participants were SVIA members.

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