Hoping to encourage investing and propel economic growth, President Bush will propose to eliminate taxes on dividends as part of his economic stimulus plan.

Dividends are currently taxed twice, once as corporate profits and again as shareholders' income. Unfortunately, some corporations therefore hoard capital rather than return it to investors. Corporations should have the ability to make capital allocation decisions on a tax-neutral basis, so this proposal would go a long way toward balancing the playing field.

In short, dividends promote good corporate governance and provide a stabilizing influence in the market. You may not trust financials, or you may think a company is high risk, but that dividend check is a tangible return.

In today's Motley Fool Take:

Bells Will Be Beaming

The Federal Communications Commission (FCC), led by Colin Powell's son Michael, is expected to soon deliver some glad tidings for the Baby Bells and some bad news for long-distance giants AT&T(NYSE: T) and WorldCom.

It will propose that the Baby Bells -- Verizon Communications(NYSE: VZ), BellSouth(NYSE: BLS), SBC Communications(NYSE: SBC), and Qwest Communications -- no longer be required to rent their networks to competitors at wholesale rates.

The Telecommunications Act of 1996 increased competition by making it easy for providers to enter local markets without having to build their own costly networks. The proposed changes would essentially undo some provisions of that Act.

If the proposal survives all challenges and is phased in after a couple of years, the Baby Bells -- with an equipment monopoly in the local markets -- would be free to charge whatever they wanted to rent landlines to competitors. AT&T, WorldCom, and other potential customers believe the rates will be prohibitive, leaving no competition in the markets.

The Baby Bells, on the other hand, say wireless handsets and cable telephones give consumers sufficient alternatives for the local market. Cable telephony, which involves companies such as Comcast(Nasdaq: CMCSK) and Cox Communications(NYSE: COX), currently makes up only about 1% of the market, but is seen as serious future competition for traditional landlines.

This extremely complicated issue bears watching as it unfolds over the next several months due to the implications for all companies involved.

Quote of Note

"Confound a telephone, anyway. It is the very demon for conveying similarities of sound that are miracles of divergence from similarity of sense." -- Mark Twain, A Connecticut Yankee in King Arthur's Court

AT&T Dials Back

AT&T (NYSE: T) , the country's largest long-distance provider, is getting a little smaller.

The company today announced 3,500 job cuts, or about 5% of its workforce. It will take a charge of $240 million in its fourth quarter to account for costs associated with the cuts, reducing earnings per share by $0.20.

AT&T pointed to improved automation and processes as the culprits for the workforce reduction, not any inherent weakness in the affected business division. More than half of the job cuts will come from management's ranks, and the departing are expected to leave in the first half of this year.

Additionally, AT&T will write down $1.1 billion in the fourth quarter related to its Latin American assets. The Dow component announced it would make this move late last year. Fourth-quarter earnings will be negatively affected by $1.40 because of the impairment. It will also take another charge of about $0.15 a share, or $200 million, to write down its digital subscriber line (DSL) assets.

The company has extended its agreement with Covad Communications to provide high-speed Internet access, and because it will primarily piggyback on Covad's DSL network instead of using its own, AT&T will write down its own assets. The new agreement, which runs through Sept. 1, 2005, will give AT&T access to 40 million homes and businesses in 96 of the top U.S. metropolitan areas.

Despite a hit to short-term earnings, the long-term net result of today's news should be positive (unless, of course, you're one of the people being "reduced"). The telecom giant has been struggling amid increased competition and declining revenues, and any cost-cutting measures should help.

On top of its recently announced increases in domestic and international long-distance rates and fees, the measures look even better. And the extended agreement with Covad should eventually earn AT&T more DSL revenue. Hopefully, that will also translate into better returns for long-suffering shareholders.

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The Charge of Gift Cards

After last month's dreadful holiday selling season, some retailers have charged renewed optimism on gift cards.

Once the turf of toy stores, bookshops, and home-electronics chains such as Best Buy(NYSE: BBY) and Circuit City(NYSE: CC), electronic gift cards have spread to most retailers. Banks and other financial services giants have even gotten into the act: American Express(NYSE: AXP) will sell the swipe-ready plastic, complete with the recipient's name printed on the card, for $5.95 more than the amount of the charging privileges.

Because of the popularity of gift cards and gift certificates, some predict the post-holiday shopping season will save the day for the country's hungry retailers. The cards are prepaid, but retailers can't book the transaction as a sale until the recipient cashes in. And most recipients redeem gift cards within two weeks.

Some industry watchers, such as consultants Bain & Co., predicted a 20% uptick in gift-card sales for 2002. Yet even the company's high-end forecast, calling for $38 billion in card sales, represents a small percentage of the total retail sales market. It won't make much of a dent.

Even more worrisome, nervous retailers cut prices drastically after the holidays to help clear out stagnant merchandise. So even if same-store sales bounce back on gift-card redemptions, it will happen on wafer-thin margins.

It seems the 2002 shopping season won't be able to shed the "Yule Be Sorry" tag.

Discussion Board of the Day: Christmas Year-Round

So how did the holidays treat you? Are you ready to move on, or are your decorations still up? If you wish the season would never end, you're not alone. All this and more -- in the Christmas Year-Round discussion board. Only on Fool.com.

Tenet Lowers Medicare's Bill

Beleaguered for-profit hospital operator Tenet Healthcare(NYSE: THC) announced it's willing to bill Medicare for so-called "outlier payments" at a much lower level than before.

It will accept payment of about $8 million a month (rather than the previous $65 million a month) in anticipation of governmental changes to its reimbursement policy.

The company has been under fire for several months now, with investigations and subpoenas in abundance. It has been a crisis for shareholders, too, with shares plummeting from the low $50s back in October to the present $16 to $17 level.

Tenet's level of Medicare payments for outliers has been on the list of concerns the entire time. For certain medical cases, they are very expensive reimbursements -- above and beyond average Medicare reimbursements. Tenet has been receiving a higher percentage than its peers, though outlier payments only represent about 5% of the company's total patient revenues.

Tenet itself has called its past pricing policies "aggressive," and both its chief financial officer and chief operating officer resigned in light of this back in November. The new leadership has undertaken a study of its own (in addition to Justice Department and Health and Human Services investigations) into the company's outlier Medicare payments, and is trying to bring Tenet's payments back in line with the industry.

On Thursday, the Justice Department demanded Tenet turn over documents related to its outlier payments, and the company said it was cooperating fully. That makes today's announcement that much more interesting. Perhaps Tenet's internal investigation was leading to this end, so it decided this was its best move. Of course, it hasn't admitted to illegal activity, but apparently it was at least gaming the system a bit.

Tenet's fiscal 2003 earnings will still fall within last month's reduced range of $2.38 to $2.78. Shares, which have apparently priced in all the bad news, are off only 1.3% for the day. Medicare still has to accept Tenet's offer, though, and there's no guarantee it will.

[Tenet Healthcare was Fool co-founder David Gardner's stock pick in January's Motley Fool Stock Advisor.]

Room for Growth at Hotels.com

Quick -- name the worst commercials on TV? Yes, those Joe Boxerads are hard to beat for pure, spastic bizarreness, and any commercial that mentions "gas with oily discharge" as a side effect surely represents an advertising low. But when it comes to wretched lines and painful acting, Hotels.com(Nasdaq: ROOM) wins the booby-tube prize.

Funny thing is those ads work. The company's namesake URL (Hotels.com owns and operates several travel-related websites) launched in March 2002, and by June, it was among the top 10 most-visited travel websites, according to Nielsen/Netratings.

But Hotel.com's strategy of attracting consumers by airing awful commercials couldn't compensate for a still-shaky travel environment. This morning, the company's management lowered its projections for fourth-quarter revenue to $270 million to $271 million, down from a previously projected $283 million to $289 million. Estimated net income was similarly revised. For 2003, it expects $1.25 billion rather than the $1.4 billion projected in October.

The culprit: Average daily rates (ADRs) on rooms increased, but not as much as expected. Also, the company spent more on personnel and advertising (with no noticeable uptick in quality). It cites a possible war with Iraq as a reason to be more cautious about near-term prospects.

But like other online travel sites, Hotels.com had a good 2002. It now expects revenue to come in between $943 million to $944 million for the year, up 71% over 2001's sales. The stock posted an almost 20% gain for the year, though most of that was wiped out by today's slashing.

As Fool Rex Moore (TMF Orangeblood) discusses in Stocks 2003, the online travel industry in general -- and Hotels.com and competitor Expedia(Nasdaq: EXPE), in particular -- have a lot going for them: no inventory risk, as well as the natural marriage of the do-it-yourself traveler with the Internet.

These profitable companies with high-growth revenues are much cheaper after today's industry-wide haircut.

Quick Takes

More Wall Streeters are likely to find themselves in hot water soon, as investigators pursuing unscrupulous analysts now turn some attention to analysts' supervisors. The National Association of Securities Dealers, which has been investigating former Merrill Lynch(NYSE: MER) Internet analyst Henry Blodget, is now looking at Blodget's bosses.

Software giant Adobe Systems(Nasdaq: ADBE) is aiming to take a bite out of the digital-camera pie. The company, known for Acrobat and Photoshop, is launching Photoshop Album, software designed to help digital-camera users edit, send, and store photographs.

According to The Wall Street Journal (subscription required, free trial available to Fools), growth in the service sector is sputtering. December numbers showed continued growth, but at a slower rate, with layoffs continuing.

The Toronto Star, in covering the 2003 North American International Auto Show, reports that while Detroit's car makers are paying lip service to the environment and fuel-efficiency, they're unveiling more powerful, gas-guzzling vehicles. A Miami Heraldstory highlights some new cars and mentions that Lamborghini hopes to double its annual sales to 1,000 vehicles, partly via a new, less expensive $160,000 offering.

International Steel is expected to buy most of the assets of Bethlehem Steel for about $1 billion. Bethlehem has been in Chapter 11 bankruptcy protection for more than a year. If the buyout happens, then International Steel will become the nation's largest steel company, following significant layoffs and the reduction of employee benefits.

Last day! Our Foolanthropy 2002 charity drive ends today. If you haven't yet met our five impressive charities, please take a few minutes to do so, and consider joining us in supporting them. Just a few dollars can literally save many lives. Let's see how much good we can do together.

And Finally...

Today on Fool.com: Bob Bobala contends with taxes and inflation as he tries to turn $1,000 into $1 million.... Rick Munarriz explores small video game players with big potential.... Decoding stock prices, in Fool's School.... And the Post of the Day: the value of 99-cent stores.

Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim