Bob's Links and Rants

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Sunday, May 11, 2003

It's only fair! If Bush wants to remove the so-called "double taxation" on dividends, he should also remove the limited liability of stockholders. The key here is that if you and your neighbor, as individuals or in a partnership, do something stupid that burns down half of your neighborhood, all of your assets are fair game for your burned-out neighbors to take in a lawsuit (and rightly so). But if you and your neighbor formed a corporation beforehand, and then did the same stupid thing, your liability would only extend to your investment in the corporation. Another analogy: if you take your yacht and dump 55 gallons of oil of the coast of Alaska, polluting someone's beach, that someone can sue you and possibly take your yacht, your house, your car, and so on. If, instead, you bought enough shares in ExxonMobil so that you owned the equivalent of 55 gallons of oil that were spilled in Alaska, your only loss would be in the possible decline of the value of your stock.

This wierd little rant is based on this longer rant at Seeing the Forest, which is based on this Op-Ed from the NY Times.