Capital Gains & Dividends

 

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Fiscal Commission Report

Estate Taxes

GROWTH Act

AMT (Alternative Minimum Tax)

Action On Taxes

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I am the lead sponsor of S. 567, which would make permanent the 2003 tax rate cuts on capital gains and dividends. The double taxation of dividends has been called one of the most distorting provisions in the tax code. Unlike interest payments, for which the issuing company gets a deduction, dividends are subject to full corporate-level taxation and, until 2003, investors were also taxed at ordinary income rates on dividends received. As a result of these very high effective tax rates, the number of companies paying dividends was on a steady decline.

Recognizing these distortions, Congress in 2003 lowered the individual-level tax on dividends and on long-term capital gains to 15% (5% for those in the lowest two tax brackets, falling to 0% in 2008). The record of these tax cuts has been better than even many of its strongest supporters predicted. Not surprisingly, the lower rates led more companies to offer larger dividends.

 

Capital Gains & Dividends Tax Relief For Idahoans In 2005, there were 114,068 tax returns filed in Idaho that reported capital gains income.  Of that number, there were 3,450 Idaho taxpayers who had an AGI of $0 or less.  Overall, of the 114,068 Idaho tax returns with capital gains reported, 74,950 had an AGI of less than $75,000. In 2005, there were 116,963 tax returns filed in Idaho that reported dividend income.  Of that number, there were 2,422 Idaho taxpayers who had an AGI of $0 or less.  Overall, of the 116,963 tax returns with dividends reported, 78,589 had an AGI of less than $75,000. Keeping lower tax rates permanent will provide much-needed certainty to Idaho families looking to invest now for the future needs of their children, and for Idaho's seniors who rely on dividend payments to maintain their standard of living in retirement.

 

Recent Treasury Department data shows that the current tax rates on capital gains and dividends saved 24 million families an average of almost $950 in 2004 alone, with seven million seniors saving an average of more than $1,230. Similarly, the tax cuts have sharply boosted economic growth. Research by the American Shareholders Association found that GDP growth, in the eight quarters prior to passage of the 2003 tax cuts, averaged just 1.6%. In the following eight quarters, however, GDP growth averaged about 4.4%. The reduced rates of tax on dividends and long-term capital gains are generally agreed to be a major factor in that improvement. I have worked closely with my colleagues on the Senate Finance Committee for enactment of the Tax Increase Prevention and Reconciliation Act. This important legislation extends the lower rates on capital gains and dividends through 2010, providing much-needed certainty to families looking to invest for the future needs of their children and for seniors who rely on dividend income to maintain their standard of living in retirement.

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