Current tax rates on dividend income, which now are capped at 15 percent, are set to expire on December 31. For the tens of millions of Americans who own stocks that pay dividends either directly, or indirectly through mutual funds, the taxes they pay on this income would surge, almost tripling in some cases. The lower rates also support the value of stocks held in life insurance policies, pension funds, 401(k) plans, or individual retirement accounts.  Now is not the time to reduce dividend income through higher taxes and penalize Americans who invest in our nation's future.

To stop this dividend tax hike, Edison Electric Institute and its member electric utility companies, along with a wide variety of associations, organizations, and companies that have a stake in this issue, are sponsoring a national grassroots advocacy campaign -- Defend My Dividend. We encourage you to join.

The tax rates on dividend income and long-term capital gains were temporarily reduced in 2003, when Congress passed the Jobs and Growth Tax Reconciliation Act.  The maximum tax rate on dividend income was cut from almost 40 percent to 15 percent, and taxpayers in the 10- and 15-percent tax brackets had their tax rates on dividend income lowered to zero.  The 2003 law also cut the maximum tax rate on capital gains from 20 percent to 15 percent.  The tax rates were extended in 2006 and again in 2010.

If left to expire, the maximum tax rate on dividend income will skyrocket  from 15 percent to as high as 43.4 percent.  The top tax rate on capital gains, meanwhile, will rise from 15 percent to a maximum of 23.8 percent.

Seniors and retirees in particular will be hard hit.  In fact, taxpayers age 50 and older file almost two-thirds of all tax returns with qualified dividend income, according to data from the U.S. Internal Revenue Service.  And taxpayers age 65 and older file close to a third of these returns.

With interest rates at record low levels -- a policy the Federal Reserve is likely to keep in place through 201 -- many of these seniors and other investors are looking at dividend-paying stocks as a safer alternative to other investments.  According to a February 2012 study by J.P. Morgan, total dividend distributions jumped from $340 billion in 2008 to about $680 billion in 2011; another big jump is expected in 2012.  The study cautions that "the current premium that investors are placing on dividend-paying stocks may be negatively impacted by a change in tax rates."

Raising tax rates on dividend incom -- even for high-income taxpayers onl -- and taxing dividends at higher rates than capital gains will hurt investors and businesses in another way as well.  Stock market investors will incur lower tax rates if they move from investing in companies that pay dividends to buying growth stocks that typically don't pay dividends, or to investing in debt investments such as corporate bonds. This has the potential to lower the dollar amount (percentage rate) by which companies ordinarily increase their dividends and could reduce the stock value for all shareholders.

As a result, Americans who own dividend-paying stocks will take a double hit -- not only will they be paying higher taxes on their quarterly dividend checks, but they will also likely see the value of their stocks fall.  And because the market is forward-looking, the fear is that their stock prices will fall sooner rather than later.  If this happens, all taxpayers who receive dividend income would be affected, regardless of their income level.

Another factor that Congress needs to consider is that shareholder income is already essentially taxed twice.  The company pays a corporate income tax on its earnings, which reduces the amount of net income that can be paid out to shareholders in the form of dividends.  The company's shareholders then pay a personal tax on their dividend income.

The top U.S. integrated dividend tax rate is currently 50.8 percent (when both corporate and individual tax levels, as well as state taxes, are factored in), according to a February 2012 study prepared for the Alliance for Savings and Investment by Ernst & Young. If Congress and the President don't act to stop a dividend tax hike, the top U.S. integrated dividend tax rate will rise to 68.6 percent-the highest level among developed nations.

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