Dividend Tax Cut Essay Example | Topics and Well Written Essays - 1000 words

Dividend Tax Cut - Essay ExampleIt was believed that in doing this, the over all U.S. economy would good because investors would be encouraged and more open to invest in companies.The assess-cut package enacted in 2003 reduced to 15 percent the top tax rate on long-term capital gains and corporate dividends (Mintz 108). While this is a significant decrease, many a nonher(prenominal) citizens were led astray as to who would actually be benefiting from the package because the Bush ecesis pointed out that almost half of all American households held some form of breed. What this statistic ignores, however, is that nearly two-fifths of this stock is held in retirement accounts, such as 401(k)s and IRAs. This distinction is crucial, because capital gains and dividend income accruing inside these retirement accounts is not subject to taxation, and olibanum would not receive a tax benefit from the reduction in the tax rates on capital gains and dividend income (Amromin 38). Therefore, the actual amount of citizens benefiting from this plan is significantly lower than what the American public was led to believe. whole the wealthiest of stock holders benefit from dividend income. According to the Tax Policy Center fifty four percent of all dividend income goes to households who make over one million dollars per year and the remaining goes to households that make over two degree centigrade thousand. When looking at the big picture, these households moreover make up three percent of the countrys population. In contrast, only 11 percent of capital gains and dividend income goes to the 86 percent of households with incomes of less than $100,000. Only 4 percent of this income flows to the 64 percent of households that have income of less than $50,000 (Amromin 39). While this information proves that the wealthy are benefiting from the dividend tax cuts, the remaining absolute majority if the population continues to pay a tax on their dividends.Another negative side a ffect to the pass of this tax cut package are the affects it will have on different private fond regard companies and charity organizations. The stock dividend exclusion will hurt municipal and state bonds, it will reduce the attraction of the Low Income Housing Tax Credit amounting to 40,000 affordable housing units lost, and it will harm the marketability of the Historic economy Tax Credit, the New Markets Tax Credit and mortgage revenue bonds (Cohen). In financially strapped cities throughout the country, many are turning to philanthropic foundations to substitute for the loss of government funds. Many charities believe that the plan for the stock dividend exclusion is bad public policy in terms of equity and fairness in our tax system, and bad for charity and philanthropy (Cohen).As for the corporations themselves, economic studies have shown that a decrease in taxes does not ultimately play any kind of role in whether corporations decide to pay out higher(prenominal) divide nds. Many citizens are concerned that instead of issuing dividends to their shareholders, corporations will substitute dividend payments for share repurchases, an alternative rule of payout that boosts the price of the companys stock for shareholders (Friedman). Like these share repurchases, many companies who say they have undertaken the dividend policies have morphed them into one term offers, or special dividends