Obama To Triple Dividend Taxes

Today the dividend tax rate is 15%. Next year it will go to 39.6% under Obama - despite his earlier claims that they would "only" increase to 20%. Then with the Obamacare surcharge, it goes to 43.4% - a near tripling from its current levels.

But the driving impulse here isn't equity. It's money. According to the static revenue estimation rules that Congress lives by, maintaining the current 15% tax rate on capital gains and dividends will "cost" the government $347.7 billion over 10 years. The Congressional Budget Office hasn't broken out how much the higher 39.6% dividend rate alone would yield in revenue, but a reasonable guess is $200 billion. Congress simply wants that cash.

But this revenue estimate assumes businesses and investors are dumb and dumber. Dividends which are payouts from business earnings are already taxed once at the corporate rate of 35%. The individual dividend tax is a second levy on that same income, and at a rate of 43.4% would take the total tax on each dollar paid in dividends to something like 60 cents.

It is quite peculiar how the government considers not passing tax increases to "cost" them money. If they don't steal 100% of your income in taxes, it will cost the government trillions of dollars.