Policy Documents

The Beneficiaries of the Dividend Tax Rate Reduction

Ernst & Young –
January 1, 2010

Ernst & Young’s Quantitative Economics and Statistics Practice was engaged by the Edison Electric Institute, in cooperation with the American Gas Association, to analyze the age and income characteristics of utility company shareholders who qualify for the lower tax rates on qualified corporate dividends.

Based on information from the Internal Revenue Service’s (IRS’s) Statistics of Income on tax returns with qualified dividends and information from a variety of sources on investors’ portfolio holdings, we have made estimates of the age and income distribution of tax returns with qualified dividends from utility stocks at the national and state levels.

In 2007, 27.1 million tax returns had dividends qualifying for the lower tax rates from equity investments. Based on our analyses of all shareholders, the percentages of tax returns with qualified dividends have the following profile:

61 percent are from taxpayers age 50 and older,

30 percent are from taxpayers age 65 and older, 6

5 percent are from returns with incomes less than $100,000, and

36 percent are from returns with incomes less than $50,000.