Policy Documents

Obama Tax Hikes: Dividend Tax Increase Hurts Seniors and the Economy

Rea Hederman, Jr. and Patrick Tyrrell –
September 10, 2010

The top tax rates on qualified dividends are scheduled to jump from 15 percent to nearly 40 percent on January 1, 2011—just one of many reasons the Bush tax relief should be extended. Without an extension, dividend payments will be taxed at a far higher rate than capital gains, distorting how companies return value to their shareholders—penalizing companies that pay out dividends. Dividend-paying stocks are owned disproportionately by seniors, which means that many retirees will have to live on smaller incomes. American companies also suffer under an antiquated U.S. tax code—which taxes companies that earn profits overseas and have already paid taxes in their country of domicile. The Heritage Foundation explains why a dividend tax hike simply has no benefit for Americans on any level—and will likely cause much harm.