NCPA - National Center for Policy Analysis

THE DIVIDEND TAX BILL ARRIVES

April 29, 2010

As the big tax increase day of January 1, 2011 approaches, the Democrats running Congress are beginning to lay out their priorities.  Get ready for bigger rate increases than previously advertised, says the Wall Street Journal.

Consider: 

  • Last week the Senate Budget Committee passed a fiscal 2011 budget resolution that includes an increase in the top tax rate on dividends to 39.6 percent from the current 15 percent -- a 164 percent increase.
  • This blows past the 20 percent rate that President Obama proposed in his 2011 budget and which his economic advisers promised in 2008. 

And that's only for starters, says the Journal: 

  • The recent health care bill includes a 3.8 percent surcharge on all investment income, including dividends, beginning in 2013.
  • This would nearly triple the top dividend rate to 43.4 percent in Obama's four years as President.  

The driving impulse here is money, says the Journal: 

  • According to the static revenue estimation rules that Congress lives by, maintaining the current 15 percent tax rate on capital gains and dividends will "cost" the government $347.7 billion over 10 years.
  • The Congressional Budget Office hasn't broken out how much the higher 39.6 percent dividend rate alone would yield in revenue, but a reasonable guess is $200 billion.  

Congress simply wants that cash, says the Journal. 

Source: Editorial, "The Dividend Tax Bill Arrives," Wall Street Journal, April 29, 2010. 

For text:

http://online.wsj.com/article/SB10001424052748703709804575202481173165478.html 

 

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