As if increasing income tax rates wasn’t enough, Congress is now contemplating tripling tax rates on stock dividends. It seems the wealthy are becoming attacked from multiple sides. And as many manual efforts to correct market ‘injustices,’ this one may have unintended results.
Subjecting dividends to higher taxes will hurt the less affluent as well as the ultra affluent. In a still unsteady economic recovery, this tactic threatens stability even further. It reaches to corporate governance since companies will no longer have the incentive to pay out profits through higher dividends. It will add more debt and diminish market returns.
In an about face from the president, it seems election year strategy may be overcoming economic prudence. There may come a point where not only the 1 percent but also the entire investing community will make their voices heard—through their votes.