President Obama's 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.
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.
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
More likely companies will be holding back on any dividend increases back to stock appreciation why do you think fcx is buying companies.
Except that most people aren't in the top tax bracket anyway and assuming a 35% corporate tax rate would be a mistake as effective corporate tax rates vary greatly. So the total tax on corporate earnings passed through as dividends could range from zero to even higher than your estimate.
I had not heard this about the new budget but am now very curious, could you source it please?