Dividend Investors: Future Tax Realities In 2012 Presidential Election

Dividend investors potentially have a lot to lose in the 2012 Presidential election.  While the real crux of the matter may boil down to which party rules the House and/or Senate in 2013 and beyond, there is a huge difference between what the proposed tax rates will be from each candidate on dividend income.  With Obama and Romney both releasing their economic plans, this topic should be front and center for investors who live off of dividends.

Mitt Romney’s plan would maintain the current 15% tax rate on income from qualified dividends (and capital gains).  For families making under $200,000 annually, Romney’s plan will cut taxes to zero on income from capital gains, interest, and qualified dividends.

Romney’s explanation of the proposed Obama tax plan noted that dividend tax rates will rise from 15% to more than 43% (and capital gains taxes would go from 15% to almost 24%).

In an effort to compare the data, we looked to what the WSJ reported recently: “Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today’s 15% rate.”

It doesn’t look like too many investors who depend upon dividend income from their investments will do as well under the latter plan. 

There is a fair question to ask here.  When exactly did $250,000.00 for a family income become rich?  If a millionaire argues that they are not wealthy then they need a reality check.  But families making $250,000.00 are not exactly rich by most standards.

JON C. OGG