Well, that's true but since the tax is paid when it is withdrawn one's rate of return is considerably less. Having those dividends be tax free when they are withdrawn increases the attractiveness of 401(k)s and IRAs. That means people will be better able to provide for their retirement, which was one of the objectives stated in W's speech.
Also, if anyone has to withdraw early, the earnings are taxed and there is a heafty penalty to boot!
Remember, with a 401(k) plan, you put in money, not stock, and you withdraw money, not stock.
With 60% of stock being held by institutions (mostly for 401(k) and other retirement plans, or for Liberal nonprofit foundations), we have to assume for the sake of argument that we have 60% of stock dividends already subject to no taxation anyway.
What is happening is the 40% of dividends not already taxed will no longer be subject to taxes.
It seems to me that the value of a 401(k) as an investment opportunity has just been substantially depreciated unless you are also getting a substantial sum in employer matching contributions.
Equity would demand that we be able to withdraw our 401(k) funds tax free to the extent such funds derive from our own direct investments and not from employer matching contributions.