Congress has reached an agreement on a fiscal cliff package that maintains parity between the tax rates on dividends and capital gains. The agreement permanently sets the top tax rate for both dividends and capital gains at 20 percent for couples earning more than $450,000 ($400,000 for singles). For taxpayers below these thresholds, dividends and capital gains will continue to be taxed at the current rates of zero percent and 15 percent, depending on a filer’s income level. These rates have also been made permanent.
“We are pleased that the final agreement recognizes that our tax code should not pick winners and losers—that we should treat dividends and capital gains equally,” said EEI President Tom Kuhn. “While there is still more work to be done to reform our tax code, Congress and the Administration took the necessary steps to prevent the largest tax increase in history from occurring, a tax increase that would have affected virtually every American.”
Utilities traditionally offer dividends as a way to attract investors and raise capital in the equity market. A pronounced shift away from dividend-paying stocks by investors would hurt the share values of these companies that stretch across many industries. Lower share values weaken the economic—and retirement—security of millions of Americans who hold those stocks directly, or own an interest in the shares indirectly through retirement plans, life insurance policies or other savings vehicles.
With the fiscal cliff tax legislation passed, we encourage Congress and the President to turn their attention to the larger issue of comprehensive tax reform in 2013.
“We look forward to working with Congress and the Administration on a whole host of financial issues critical to our industry, such as addressing the debt/deficit, corporate tax rates, accelerated depreciation, interest deductibility on debt and normalization treatment,” said Kuhn.