The president seems to be engaging in some tax jujitsu — proffering a corporate tax cut in the light of day to seem reasonable, while burying a big tax hike in his massive budget to empty our wallets:
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%.
Fortunately Obama’s budget is DOA in Congress. But, give the man four more years to try again? I don’t know about you, but I can’t afford his fundamental transformation.
His target for this tax hike is “the rich,” people who invest and live off investments or make more than $200,000 per year ($250k for couples). But those most likely to be hurt are retirees living off their dividends plus Social Security or pensions.
IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.
Why does Barack Obama want our senior citizens to starve?
Exit question: Where’s AARP on this?