A Very Bad Idea: Taxes on Dividends

If Obama's plan comes to pass, it would mean taxes would rise by 2.5 times their current level. (From about 20% for Indiana residents to nearly 50%). Fear not. This does not have a chance of passing the present Congress. It's pure politics. My reason for such a short response was not as a time saver or to be flip, it was to state the obvious. We already have ample evidence of failed attempts by President Obama seeking to raise taxes on the rich. Republicans in the House of Representatives have blocked all tax hike attempts from the president, even if it meant shutting down the government. I can see no reason why they would suddenly change now.

I also disagree with a recent Wall Street Journal article entitled "Obama's Dividend Assault," suggesting that the entire stock market would come under pressure if the tax hikes were to be enacted. That just will not happen. You only have to go back and look at what happened prior to and after President George W. Bush pushed through the dividend tax cuts of 2003. Dividend-paying stocks acted no differently from non-dividend payers immediately prior to or after the cuts. The reason for this is simple, as much as 70% of all stocks are held by non-taxable accounts such as retirement plans, foundations, life insurance, annuities, trusts, and mutual funds that have the ability to manage taxes.

Source: Rising Dividend Investing

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