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Massive dividend tax increase looms, threatening U.S. economic recovery

September 23, 2010

The threat of a massive increase in the federal tax rate on dividend income is looming on the horizon. Dividend income is currently taxed at a maximum rate of 15 percent as the result of a temporary tax relief measure passed by Congress in 2003.  However, if Congress fails to act soon, the tax rate on dividends will soar as high as 39.6 percent come January 1, 2011.  This could lead to unintended consequences. Lower dividend tax rates are good for investors, consumers, American businesses, and the recovering U.S. economy.

There’s a perception that lower dividend tax rates benefit only wealthy taxpayers. However, that is simply not the case. More than 27 million Americans from all income levels and age groups directly own stocks that pay dividends. In addition, tens of millions of Americans own stocks indirectly through mutual funds, life insurance policies, IRAs, pension funds, or 401(k) plans.

Coming off of one of the worst economic periods since the Great Depression, lower dividend tax rates have helped to attract and keep shareholders who are interested in a more long-term buy and hold strategy, which benefits individual shareholders, companies, and ultimately, the economy. As the nation continues to try to recover, now is not the time to discourage Americans from investing in dividend-paying companies by raising their taxes on dividend income. Instead, Congress should encourage long-term investment in our nation’s economy and future.

That is why Associated Industries of Florida has joined the Utility Shareholders of Florida (USoF) in their grassroots campaign to stop a dividend tax hike. USoF is a non-profit, member-driven organization that exists to give Florida’s utility shareholders a voice in the energy policy arena. Members of USoF are not just investors; they are also consumers and families on a budget.  Many are retirees who rely on their dividend income to help with everyday living expenses, making the dividend tax issue a critical fight for USoF. 

Help protect our fragile economy by telling Congress to stop a dividend tax hike.  To email your representatives in Washington, visit the USoF website at www.utilityshareholdersfl.org, and click on the dividend web banner at the top of the page.

I hope you will take a moment to participate in this important campaign.  Congress must act now to stop a dividend tax hike and encourage Americans to invest in their future. A vote to retain lower dividend tax rates is a vote of support for our economy.