THE VIRGINIAN-PILOT 
              Copyright (c) 1995, Landmark Communications, Inc.

DATE: Sunday, February 5, 1995               TAG: 9502020013
SECTION: COMMENTARY               PAGE: J4   EDITION: FINAL 
TYPE: Letter 
                                             LENGTH: Short :   30 lines

TAXING DIVIDENDS

The writer of the editorial ``Tax reform is needed'' (Jan. 23) seems to buy the argument that taxes on dividends should be paid as taxes are paid on wages (and on interest paid on corporate bonds).

What the writer ignores is that wages (and bond interest) are corporate expenses and are deducted before figuring profit, but dividends are considered part of profit and are taxed as such. It is analogous to an individual filing a Schedule C, Profit or Loss From Business, paying a tax on any profit, then carrying the profit (less tax) to the 1040 and figuring it as part of taxable income again.

To be consistent, the tax code should not allow corporations to deduct wages and interest paid from their taxable corporate profits. Wouldn't the congressional spenders like that?

I do feel that Representative Armey is wrong in taxing dividends at the corporate level. They should be tax-deductible earnings distribution, but fully taxable to the recipient.

DAVID DOOLING

Norfolk, Jan. 23, 1995 by CNB