Tags: gregg | capital | gains | tax

Gregg: Watch Out for Dividend, Capital Gains Tax Increases

Monday, 14 May 2012 12:22 PM

By Newsmax Wires

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A multitude of taxes are set to increase next year which may hurt the economy, says former New Hampshire GOP Sen. Judd Gregg.

Two of the less ballyhooed ones — dividend taxes and capital gains taxes — are quite important, he writes in The Hill.

For people in the top bracket, taxes on most stock dividends will soar to 43.4 percent from 15 percent currently, Gregg says. “This will create numerous unintended consequences that will pervert investment decisions and drive down economic activity.”

Retirees and others who depend on dividends for their living expenses will face a harsh adjustment. “This is especially pernicious as we head into a time when the largest generation in American history, comprised of the so-called baby boomers, is moving into retirement,” Gregg writes.

“This is the first generation in history to retire depending primarily not on defined benefit plans but rather on contribution plans that are disproportionately comprised of dividend income. Thus this generation, aging out of alternative ways to generate income, will find itself being socked with a tax increase promoted by the left as a prerequisite for ‘fairness.’”

In addition, stocks of companies paying dividends have soared recently, as investors have sought income. But now “these companies are going to see their stock prices come under pressure,” Gregg writes. That’s because the tax increase will cut demand for them.

As for capital gains taxes, the top rate on long-term gains will rise to 23.8 percent from 15 percent currently. A new 3.8 percent tax on passive income also will probably take effect. “Both of these changes will further retard any possibility of economic expansion,” Gregg writes.

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