One of the changes (with hope) planned by the Obama administration is
the raising of the tax on dividends from 15% to as high as 44%.
Coincidentally this advance will occur six weeks after the
election.
Dividends are important. Many people live on them, particularly retirees. More, according to Siegle, rising dividends account for 90% of the historical growth in stock prices. Raising the taxes on them will rip through the markets like the Grim Reaper. Allocations will change. The uncertainty of returns will become the norm. This, of course, flies in the face of the public policy of the Fed, which hopes to increase public confidence, investment and risk acceptance.
Why are the tax rates different for dividends? Because they are already taxed at the 35% rate as corporate profits first. That, plus the 44%, equals a total of about 64% tax on corporate profits.
As with most policy decisions, the government expects a static situation, like a hunter who expects the deer to stand still even after several shots. But if you were the CEO of a company, how would you respond to this? And what would you do if you were an investor?
Dividends are important. Many people live on them, particularly retirees. More, according to Siegle, rising dividends account for 90% of the historical growth in stock prices. Raising the taxes on them will rip through the markets like the Grim Reaper. Allocations will change. The uncertainty of returns will become the norm. This, of course, flies in the face of the public policy of the Fed, which hopes to increase public confidence, investment and risk acceptance.
Why are the tax rates different for dividends? Because they are already taxed at the 35% rate as corporate profits first. That, plus the 44%, equals a total of about 64% tax on corporate profits.
As with most policy decisions, the government expects a static situation, like a hunter who expects the deer to stand still even after several shots. But if you were the CEO of a company, how would you respond to this? And what would you do if you were an investor?
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