Senate Dems Consider Extending MORE Tax Breaks for Rich Taxpayers with Dividends than Obama Proposes
http://ctj.org/ctjreports/2012/07/senate_democrats_consider_extending_more_tax_breaks_for_rich_taxpayers_with_dividends_than_obama_pro.php
Report in PDF
The tax cut proposal circulating among Senate Democrats would provide much larger tax breaks to high-income individuals than President Obama proposes including an average break of $166,500 for those making over $20 million because it would extend most of the Bush tax cuts for stock dividends.
Senate Democrats are rumored to be influenced by a report commissioned by the Edison Electric Institute (a lobbying group for corporate utility companies) claiming corporate stocks will be harmed if dividends paid to high-income shareholders are taxed at the same rates as other income, as President Obama proposes. The report claims that even people who would not lose any tax cuts would be harmed because their stocks would be worth less if the richest Americans must pay ordinary income tax rates on their dividends.[1]
The gaping hole in this logic is that two-thirds of stock dividends are not paid to individuals subject to the personal income tax but rather are paid to tax-exempt entities like pension funds.[2] There is no reason why stock prices would be affected by a tax that only applies to one-third of the dividends paid on them.