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Jeremy Siegel: Dividend Tax Headed Higher, But Not By Much

By Dan Weil   |   Wednesday, 28 Nov 2012 09:15 AM

Government budget negotiations will likely result in modestly higher dividend taxes, says Wharton School of Business economist Jeremy Siegel.

“I think the dividend rate will go up, but not as much as the stance of Obama at the present time,” he tells CNBC. "I don’t think it will be all that much different, but it is going to be higher."

Obama has proposed raising dividend taxes – currently 15 percent – to the ordinary income tax rate for people with annual income of more than $200,000. That would mean a dividend tax of 39.6 percent for people in the top bracket (plus a 3.8 percent tax to pay for Obamacare).

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

In light of the potential increase in dividend taxes, more than 60 companies in the Russell 3000 stock index have announced special dividends so far this quarter.

“It’s smart," Siegel said. "Just like people taking capital gains now.” The moves won’t affect corporate performance one way or the other, he says.

Drew Industries announced a special dividend hike Monday.

“We have cash on the balance sheet and no debt. So we figured if we’re going to issue a dividend, we might as well do it now before the tax rate goes up,” said CEO Fred Zinn, according to The Wall Street Journal.

Not surprisingly, companies run by big shareholders have proven particularly eager to offer special dividends, as top executives would be among the biggest beneficiaries.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

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