Pataki Makes the Right Call
New York Gov. George Pataki has endorsed the president's plan to end the tax on stock dividends. As you might expect, the typical chorus of liberals is lined up to complain that the federal plan might cost New York some tax revenue too. Pataki appears to understand better than they do that cutting taxes will boost the economy - and boost revenue.

Specifically, the governor singled out for praise a proposal to eliminate taxes on corporate dividends paid to taxpayers, the centerpiece of the plan President Bush announced on Jan. 7 for kick-starting the stalled economy. "The president's new economic stimulus plan will help New Yorkers, specifically his proposal to eliminate the double taxation of dividends," Mr. Pataki said in his first public statements since the Bush announcement. "This element of his stimulus package will help a financial industry in New York that is hurting."

But, the Times reprots, Gov. Pataki "was noticeably silent on the question of whether New York, whose income tax laws are tied to the federal laws, would enact changes to keep it from automatically following the federal government's lead."

Some state officials, mostly Democrats, have said that the Bush proposal will hurt New York at a time when it faces a cumulative deficit of $12 billion and needs every source of revenue it possesses. Alan G. Hevesi, the state comptroller, said that if the state piggybacks on the federal plan and decides it will also stop collecting a dividend tax, it could lose $551 million in revenues in the fiscal year that begins April 1, and $2.5 billion over four years.

The notion that Bush's plan to end the federal dividend tax will harm state revenues is a canard being tossed about by liberals who oppose tax cuts in general. But here's the truth for New York and any other state with a tax on dividends: staes can de-couple their tax codes from the federal system, create a new state dividend tax form and continue collecting the tax, simply, and easily. Tennessee already does it. Or states can continue to tie their dividend tax to the federal system, cut taxes along with the feds, and accelerate the economic growth in their state.