The Market Is Punishing Dividend Stocks

For top earners, the tax rate on dividends is going to hit 43.4% if there are no changes in the current law. There are many layers to this whole "fiscal cliff" drama. The spending cuts are just one, but the potential hits to the economy are numerous, and this is just one example. Goldman's Alec Phillips says:

The most likely scenario in our view is an extension of these investment-related tax rates along with other expiring tax provisions into mid-2013, at which point broader reform legislation might be enacted. Over the longer term, the risk is clearly in the direction of higher rates on capital income, since tax rates on capital gains and dividends are at historical lows, the Obama Administration has withdrawn support for preserving preferential rates on dividend income, and a new 3.8% tax on passive income is likely to take effect for some taxpayers in 2013 regardless of what Congress decides on the "fiscal cliff."

Source: Business Insider

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