Attack on Dividend Investors?

Well President Obama submitted his budget proposal last week. I know its mostly campaign gimmicks and doubtful much of it will pass, but there is something in there that hasnt been talked about much that scares me. You see President Obama is asking for a tax increase on the wealthy, no suprise there huh, but it hurts just about everyone else even more.

We are talking about the tax on dividend payments which is currently at 15% for everyone and which he wants it raised to 39.6% and on top of that there will be a investment surcharge tax of 3.8% and a reduction in exemptions and deductions making the effective tax rate 44.8% starting in 2013. Now you may be thinking, wait isnt that only for the filthy rich people (a status I aspire to be in). Yes it apparently is only for those making more than $200k which effects alot of small businesses and entrepreneurs. But it is still going up for everyone, instead of the max 15% your dividends will be taxed at your regular tax bracket as of 2013. Oh and your taxes are going up as well in 2013 unless something changes, but we are talking about dividends in this post.

You see it has been shown that dividend payments have a correlation to the dividend tax rate. When the tax rate is up dividend payments are down. When President Bush passed his evil tax cuts (I guess you can tell Im a bit biased here) dividend income tripled in the first few years. Increase the tax rates and it stands to reverse. Its not just the rich that will get soaked with the tax increases but the rest of us that depend on dividend income in our retirement accounts that will ultimately be hurt?

Besides in my mind dividend money has already been taxed several times. More often then not you are using after tax dollars to by dividend stocks. Dividends are also paid out profits that are left over after the company has paid taxes. So they are then taxed again when given to you…

Im tired of hearing the answer for every thing is to raise taxes, or tax the rich more. It’s been proven over and over that an increase in taxes does not always equal an increase in revenue. In fact often the case when you try to do targeted tax increases and fees it finds a way to trickle on down to the rest of us and it’s the lower brackets that end up paying.

So get ready to start seeing your returns dwindle again on your dividend payments , that is if dividends continue to be paid…