Everyone knows tax increases are coming.
But a Wall Street Journal editorial explains that these hikes will be bigger than expected, with taxes on dividends nearly tripling.
Last week, the Senate Budget Committee passed a fiscal 2011 budget that includes a 164 percent increase in the top dividend tax rate to 39.6 percent from 15 percent now.
That’s almost twice as high as the 20 percent rate President Barack Obama proposed in his 2011 budget and which his economic advisers promised in 2008, The Journal points out.
But that’s just the beginning. The new healthcare law levies a 3.8 percent surcharge on all investment income, including dividends.
Put it all together, and the top tax rate on dividends will nearly triple to 43.4 percent.
And when you consider that corporations already are taxed 35 percent on their profits, the total tax paid on each dollar of dividends would hit about 60 cents.
The likely outcome isn’t pretty.
“You can expect fewer businesses either to offer or increase dividend payouts, which means less dividend revenue for the government,” The Journal points out.
And, “The millions of Americans who receive dividend income — most of them not rich — need to begin adjusting their investment strategy accordingly.”
Magazine publisher Steve Forbes has cited the problems with tax increases for years.
In a recent speech, he said, “All this talk of finding new ways to raise taxes is so counterproductive,” the New Britain (Conn.) Herald reports.
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