Companies Move to Avoid Obama driven tripling of dividend tax rates next year
the staff of the Ridgewood blog
Ridgewood NJ, Taking advantage of super-low interest rates, companies have been issuing debt at a record rate this month planing to use the proceeds to fund special dividends before the year is out.
Fearing a tripling of dividend tax rates next year, companies have found one-time payouts and early payments of quarterly dividends as a way to beat some of the impact of the “Fiscal Cliff.” and perhaps avoid giving the government anymore money than necessary .
Costco ,symbol COST is the latest example and whose founder is an avid Obama supporter announced a $7-a-share payout to stockholders Wednesday and is issuing bonds to pay for the $3 billion dividend.
The dividend tax rate, now 15 percent, and is set to expire Dec. 31, The fear of expiration has led many investors to dump dividend paying stocks, like utilities while eyeing a whole other group that are or could be paying special one-time dividends.
The concern is that the dividend tax rate could revert to 39.6 percent for the highest tax bracket if Bush tax cuts are not extended for the wealthy, as proposed by President Barack Obama.The rate increase would also punish seniors, union pensions and company 401K plans as well as obviously taking money away from business resulting in further job market deterioration.
The Affordable Care Act or Obamacare includes a new 3.8 percent tax on dividends and other investment income for wealthy taxpayers, and that would take the dividend tax rate up to 43.4 percent. At the same time, capital gains taxes, now 15 percent, could rise to their former rate of 20 percent.
All these factors make special payouts common sense.for investors.