Jul 13, 2012 ---
A dividend tax rate hike scheduled
for January might have an impact on Americans who rely directly and indirectly
on dividends, a study found.
Americans at all income levels may
see an increase—and older investors who are at or nearing retirement age might
hurt the most, according to a study prepared for Edison Electric Institute (EEI) by the
accounting firm Ernst & Young. The increases stem from tax cuts set by
President George Bush that are set to expire December 31.
The study was released just ahead of
a House vote, slated for July 30, on whether to extend the current federal
income tax rates, which includes the tax rate on dividends.
“Dividend income benefits millions of
Americans who are not wealthy, including many seniors and those investing for
the future of their families,” said Lew Hay,
chairman of EEI and executive chairman of NextEra Energy in Juno Beach, Florida.
“Raising taxes on dividends would harm every American who owns dividend-paying
stocks, as well as anyone who has an interest in a mutual fund, 401(k) plan,
pension plan, or life insurance policy that invests in those stocks.”
The current 15% tax rate on
dividends will expire at the end of the year, unless Congress and the president
intervene. If no action is taken, dividend tax rates for all income levels will
increase, with the maximum tax rate skyrocketing to 43.4% —a 189% increase,
EEI’s study contended.
“This is a non event for most elderly people, who mostly earn less than
$250,000, so they’re not affected,” said Chuck Marr, the director of federal
tax policy for the Center on Budget and Policy Priorities. “Utilities are the
ones most concerned about dividends because their equity is similar to that of