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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8776  
Subject: Re: Dividend Tax Increase Date: 11/15/2012 11:39 PM
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I still do not understand the great concern.

Well, if you make $100,000 in dividend and the tax rate doubles you are certainly bummed a bit. So then you start looking around and say, hmmm, I can invest in tax free munis and get a better return on my money. So you sell you divys, thus driving down the stock price.

Now, if you are a div growth reinvestor, then maybe you are actually happy. All your stocks go down in price, but since you never sell, you are now buying back at a lower price with a higher return.


He is a tax change I would like to consider: The first $5000 (or $10k) of dividend, interest and cap gains are tax free. Then you tax the rest at a higher rate: 20% or maybe marginal rate. (or next $5k is 20%, the rest at margin) For most people this is a great benefit and encourages savings and investing in dividend stocks. For the extremely rich, it is just a drop in the bucket, so they end up paying more taxes...until they figure out where to invest with less tax pain, then the Gov does not get the income they expect.

When rates were reduced, didn't the revenue from those sources actually go up? And didn't corporations increase dividend payouts (which are double taxed so that helps gov revenues).
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