The Impact Of Raising Taxes On Dividends

This is a chart from today’s Wall Street Journal:


The chart shows what happens when taxes on dividends is raised. The editorial that goes with the chart goes into the details of why this happens. Please follow the link to read the details.

The chart was posted in response to President Obama’s proposal to raise taxes on dividends from today’s rate of 15 percent to 39.6 percent, actually 41 percent after the phase out of deductions and exemptions, and a 3.8 percent surcharge, giving you an effective rate of 44.8 percent. The new rate would only apply to those making over $200,000 a year (individuals) or $250,000 (couple).

Exactly who would be impacted by this increase in the dividends tax? Actually, senior citizens would be hardest hit (yes, that is one of many reasons I am up in arms about this!). As you can see from the graph, when the tax rate on dividends goes down, corporations pay more dividends. Many senior citizens live on their dividends–if dividends decrease, their income decreases. Paying fewer dividends also devalues stocks–thus impacting everyone’s stock portfolio or 401k plan. Everyone loses.

The article concludes:

Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.

We need to stop worrying so much about soaking the rich and worrying more about making tax policy that allows everyone who works hard to become rich!


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