President Bush’s big conference in Waco, Tex., about how to fix the economy and buoy the financial markets was easy to miss a public relations stunt in front of a friendly audience.

That the event was thin on substance was disappointing but not surprising. The president doesn’t have much of an economic policy, and his economic team is minor league compared to the heavy hitters like Robert Rubin who advised Bill Clinton.

Still, a few attendees had ideas. One was Wharton finance professor Jeremy Siegel, author of the well-known book “Stocks for the Long Run.” Siegel, his Wharton colleague Andrew Metrick and Harvard finance professor Paul Gompers have been arguing recently that many of the ills that afflict the financial markets could be addressed by eliminating the corporate tax on dividends.

Their case has a simple elegance that makes it worth considering.

Currently, dividend money is taxed twice first when the company’s profits are taxed, then again after the shareholder receives the dividend check. This makes companies reluctant to pay dividends, which is why average annual dividend payouts have shrunk from the 5 percent to 6 percent level (relative to stock price) of two decades ago, to less than 2 percent.

Rather than pay big dividends, companies can reinvest profits in ways intended to boost their stock price. They can invest in research or expansion, or use the money to buy back shares. Instead of receiving dividends, which are taxed at income tax rates as high as 38.6 percent the year they are paid, shareholders enjoy rising stock prices. As long as they hold the stock, they postpone the tax bill. And when they do sell, the tax is at the long-term capital gains rate of only 18 percent to 20 percent.

What’s wrong with this system?

First, say Siegel and his colleagues, it encourages companies to borrow excessively, since corporate interest payments are tax deductible. Hence, they sell bonds to raise money instead of issuing new blocks of stock.

Second, by emphasizing stock price gains, the system serves greedy executives bent on boosting the value of their stock options. It provides an incentive for the kind of accounting shenanigans we’ve seen the past year. If more of the shareholder return (share price gains plus dividends) came from dividends, share prices would not rise as quickly. That would make executive stock options less attractive.

Indeed, executives who wanted to profit from stock returns would have to own the stock to get the dividends, putting them in the same boat as ordinary shareholders. In contrast, an options holder does not have money tied up and thus doesn’t have the same risk of loss faced by ordinary shareholders.

The three academics suggest eliminating the corporate tax on dividends while continuing to require that individuals pay income tax on dividends they receive. That would help curtail the problems noted above.

Moreover, getting rid of the corporate tax would, in effect, increase profits, allowing companies to pay larger dividends to offset the income taxes paid by shareholders.

If companies could get a tax deduction on dividend payments, but still have to pay income tax on retained earnings, they would be likely to boost dividends. Corporate accounting would be more believable if shareholders actually received their share of profits.

Siegel and the others go even further, noting that the recent corporate rush to incorporate in tax havens like Bermuda is meant to avoid taxation on profits earned overseas. If dividend payments were deductible, companies could avoid tax on foreign profits simply by paying them out as dividends.

At Waco, Charles Schwab, head of the big discount brokerage, told Bush that double taxation of corporate dividends needed to be eliminated.

“That makes a lot of sense!” Bush answered.

It’s certainly worth a close look.