Obama Proposes Dividend Tax Hike

President Barack Obama’s 2013 budget includes a proposed dividend tax hike that could end up tripling investor’s tax bill next year.

The current tax plan was signed into law by President Bush in 2003 and then extended for 2 years by President Obama in December 2010. Under the current plan, qualified dividends are taxed at a max rate of 15 percent. Many Americans that fall into lower tax brackets end up paying no taxes on their dividend income.

Dividend tax rates have been a controversial issue for years due to the issue of double taxation. Corporations already pay taxes on their net profits from which corporate dividends are then paid out to investors. Why should those shareholders be required to pay an additional tax on that dividend income?

President Obama’s plan once again calls for dividend income to be taxed at each individual’s marginal tax rate. That would result in many investors seeing their tax rate go from 15 percent to 39.6 percent.

The Wall Street Journal pointed out today that the overall impact to investors will be even worse when you factor in the 3.8 percent investment tax that will be levied to pay for ObamaCare. That could push the tax rate on dividend income to nearly 3x current levels.

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