By Brett Ferguson and Jonathan Nicholson
Publication date: 04/29/2010 – from the Bureau of National Affairs, Inc.

The Senate Budget Committee-approved budget resolution does not make room for dividends tax rates to continue to be tied to capital gains rates after 2010, raising questions among some lawmakers about whether Democrats intend to allow the top effective tax rate on dividends to soar to more than 40 percent.

Since the Jobs and Growth Tax Relief Reconciliation Act of 2003 (Pub. L. No. 108-27), the maximum dividend and capital gains tax rates have been linked together at 15 percent. Unless Congress acts in the coming months, the capital gains tax rate will return to its pre-2003 level of 20 percent in 2011 and dividends will again be taxed at ordinary income tax rates of up to 39.6 percent.

When combined with the 3.8 percent surtax created in the Health Care and Education Reconciliation Act of 2010 (Pub. L. No. 111-152), the effective top tax rate on dividends would rise to 43.4 percent in 2013.

For the rest of this article, go to Senate Budget Raises Questions if Dividends Rates Will Top 40 Percent

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