A Dividend Tax Increase Will Hurt Investors

The current federal tax rates on investment income -- dividends and long-term capital gains -- are capped at 15 percent. Those rates are set to expire at midnight on Dec. 31 -- and if they do, the rates on capital gains will go as high as 23 percent and the top tax rate on dividends will rise to 43.4 percent. With uncertainties hanging overhead, investors are becoming increasingly concerned about what to do with their investments. The most direct impact would be on the 25 million Americans who invest directly in dividend-paying stocks. Within this group, many are seniors.

The companies that pay dividends tend to be more reliable and stable. Stability and the quarterly payout make these companies especially attractive to seniors who often need help supplementing their income. This is especially true today when traditional investment vehicles are yielding little to no gains. Seniors rely on this additional income from dividends to help pay the bills -- rent, health care, food and other expenses. The next group to feel an impact on higher dividend taxes would be those who invest in mutual funds and have retirement accounts, pension plans and life-insurance policies.

Source: The Arizona Republic

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