More of this Feature • Part 1: The Dividend Tax Cut - Bush's Plan • Part 2: The Dividend Tax Cut - Substitution of Bonds for Stocks • Part 3: The Dividend Tax Cut - How Does This Effect Interest Rates? • Part 4: The Dividend Tax Cut - How Does Interest Rate Increases from Bonds Effect You? • Part 5: The Dividend Tax Cut - The Supply Side • Part 6: The Dividend Tax Cut - Have Your Say

Related Resources • Bush Offers Dividend Tax Cut Plan • Dividend Tax Cut and Economic Stimulus Plan • White House Release - Dividend Tax Cut and Economic Stimulus Package • Tax Policy Center - Information on Dividend Tax Cut

Most economists feel that the elimination of the dividend tax will have the intended effect of raising the demand and price of stocks, which will cause a rise in the value of the various stock market indices. However, for any change in policy, we must not just examine the intended impact of the policy, but we must determine what its unintended consequences will be. One of the unintended consequences will be that the dividend tax cut will cause a rise in interest rates. This is bad news if you're planning to buy a car or house in the future, as your monthly payments will rise due to higher interest rates. Unfortunately, I haven't seen any scientific studies on how much interest rates will rise due to this policy change. Economic theory can only tell us that interest rates will rise; an extensive econometric study is needed to determine what the magnitude of the rise will be. If you have any thoughts or predictions on what will happen, or know of a study I may have missed, please join us in the forums. I look forward to hearing your input.

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