Senate Democrats Split From Obama on Taxing Dividends

[Judi Lynn]

Source: Bloomberg

Senate Democrats Split From Obama on Taxing Dividends
By Richard Rubin - Jul 14, 2012 1:31 PM CT

Senate Democrats are seeking to set the top tax rate on dividends at 23.8 percent, almost 20 percentage points lower than the proposal offered by President Barack Obama in his budget.

That detail, along with a top estate tax rate of 45 percent and a one-year patch to prevent the alternative minimum tax from affecting millions more families, are part of the written version of Senate Democrats’ attempt to extend expiring income tax cuts for one year. The core of the proposal would extend the George W. Bush-era cuts through 2013 for 98 percent of households while letting them expire on income above $200,000 for individuals and above $250,000 for married couples.

A Senate Democratic aide, who spoke on condition of anonymity, confirmed the details. Senate Majority Leader Harry Reid, a Nevada Democrat, said this week that the Senate will vote before the August recess.

Obama has made his push for a tax-cut extension for all but the highest-income families a central theme in his presidential campaign this week. He has been asking Congress to send him the plan for his signature as soon as possible.


Read more: http://www.bloomberg.com/news/2012-07-14/senate-democrats-split-from-obama-on-taxing-dividends.html

[DJ13]

1. ....

[ProgressiveEconomist]

16. IMO Bloomberg's headline is false. How is the Senate bill a "split"

from what President Obama has proposed for a 1-year extension of Bush tax cuts for the 98 percent? The Senate bill caps current income tax rates at $250k for couples, exactly what the President proposed last week.

[progree]

19. I think the "split" is on taxation of the top earners

On the top earners ($200,000 individuals, $250,000 married filing jointly):
Obama wants to tax at 43.4% rate (39.6% + 3.8% ACA surtax for high earners)
Senate Dems want to tax at 23.8% rate (20.0% + 3.8% ACA surtax for high earners)

ACA being the Affordable Care Act - that 3.8% surtax on high earners is in the original law (its not something new).

As you indicate, the Senate Dems (and Obama) are keeping the Bush tax rates for us low-lifers in the bottom 98%.

[ProgressiveEconomist]

22. But the President clearly said, Leave taxation on the top 2 percent (and implicitly on

dividends and capital gains) for another day; "Let's agree on what we agree on". 24.8 percent is good enough for now, and let's talk about the "Buffett Rule" later.

You and Bloomberg are jumping ahead from the President's CURRENT tax agenda, on which there's NO Democratic Party "split".

Republicans WISH the Democratic Party would split the way Republicans are splitting on disclosing their candidate's tax returns. IMO Democrats are going to come out of thier convention united and ready for victory, unlike the way Republicans are heading.

[progree]

23. I'm just going by what the article said and what I've seen and heard in the news over and over

But the President clearly said, Leave taxation on the top 2 percent (and implicitly on dividends and capital gains) for another day; "Let's agree on what we agree on". 24.8 percent is good enough for now, and let's talk about the "Buffett Rule" later.

You and Bloomberg are jumping ahead from the President's CURRENT tax agenda, on which there's NO Democratic Party "split".

Obama's 2013 budget calls for taxing dividends on the upper earners at the ordinary tax rate (the same as wage and salary "earned" income). Which, with letting the marginal rates on the top two brackets return to the Clinton rates means 39.6% on the top bracket. Plus 3.8% ACA surcharge = 43.4%

The Senate Democratic bill calls for taxing the dividends of upper earners at 20.0% + 3.8% ACA = 23.8%.

That sounds like a split to me.

I don't know where you got an Obama quote about leaving taxation on the top 2% for another day. Obama has clearly and consistently all along wanted the Bush tax cuts on the top 2% to expire, except he has apparently been for having a maximum of 20% maximum rate on dividends until his 2013 budget (which with the 3.8% ACA surcharge would be 23.8%).

I don't know what you mean about the CURRENT tax agenda and some future tax agenda? I guess I'm just not following at all.

http://www.bloomberg.com/news/2012-07-14/senate-democrats-split-from-obama-on-taxing-dividends.html :

The proposed bill would set the basic top rate at 20 percent for both capital gains and dividends. The 2010 health care law included an additional 3.8 percent tax, yielding the 23.8 percent rate. In his 2013 budget, Obama called for taxing dividends as ordinary income, subjecting them to a top rate of 39.6 percent and the 3.8 percent surcharge for a 43.4 percent total.

Obama’s previous budgets had included the 20 percent rate on dividends.

[Liberal_Stalwart71]

2. Again, here's why a public option was NEVER going to happen!

[DCKit]

3. Thinking as someone who's nearing retirement, I have to disagree with our President.

Unless, of course, they will be treated as "earned income" for tax purposes. Only then does it make sense.

[xtraxritical]

5. Me too, I disagree. Maybe dividends for the big players, like Romney, should be taxed at 40%

but for small time people with low incomes, like retirees, the current rate is imminently fair. There is nowhere to earn interest on small amounts of money so people are forced into high risk stock market investments to try and keep up with inflation. It's just another example of bank fraud, they charge over 20% on their credit cards but barley pay .25% (1/4 of one percent) on savings accounts. The President should think about this more.

[ensemble]

12. The current rate...

for a married couple earning under about $70K adjusted income is 0%.

[progree]

20. 70 K$ taxable income = 89 K$ adjusted gross income

for a couple taking the standard deduction and 2 exemptions.

Neither Obama nor the Senate Dems are proposing to change the Bush tax rates on dividends or anything else for the bottom 98% ($200,000 individual / $250,000 married filing jointly). So couples with an adjusted gross income of below 89 K$ (and in cases where they itemize deductions or have dependents its even more than 89 K$) will continue to pay a 0% rate on "qualified" dividends

[xtraxritical]

21. You know I used the word dividends when I really meant capital gains, sorry for the confusion.

[progree]

24. Both the qualified dividend rate and the LT capital gains rate remain where they are for bottom 98%

under both Obama and Senate Democrat proposals:

The "lower peasants" -- those in the 15% income tax bracket or below -- pay a 0% rate on both dividends and long term capital gains. For singles in 2012 that is up to a $35,350 taxable income, which corresponds to a $45,100 adjusted gross income (AGI) for a single taking the standard deduction and one exemption (him/her self). For singles who itemize deductions and/or have children, the AGI threshold is higher. For married couples filing jointly in 2012 that is up to a $70,700 taxable income, which corresponds to a $90,200 adjusted gross income (AGI) if they take the standard deduction and two exemptions (one for each person in the couple). For marrieds who itemize deductions, and/or have children the AGI threshold is higher.

The "upper peasants" -- those above the 15% income tax bracket but with income below $200,000 individual / $250,000 married -- pay a 15% rate on both dividends and long term capital gains.

Just to clarify for anyone in the bottom 98% (the "peasants" in the above) who might be worrying about a dividend or long term capital gains increase -- there won't be under Obama's proposals or Senate Democrat proposals, or for that matter, Mitt RobMe's.

[pscot]

4. As Dick Durbin said

The banks own that place.

[russspeakeasy]

10. ...and "Dick The Dick", should know.

[on point]

6. Simplify things. All income regardless of source taxed at the rate for that income level.

[ensemble]

11. I believe....

that is what the President is more or less proposing, although there will be an additional tax of 3-4% on dividends to help pay for the new healthcare law.

[progree]

7. Where the strange number (23.8%) comes from

"The proposed bill would set the basic top rate at 20 percent for both capital gains and dividends. The 2010 health care law included an additional 3.8 percent tax, yielding the 23.8 percent rate. In his 2013 budget, Obama called for taxing dividends as ordinary income, subjecting them to a top rate of 39.6 percent and the 3.8 percent surcharge for a 43.4 percent total. "

(Currently, "thanks" to the Bush tax cuts, both capital gains and "qualified" dividends are taxed at a maximum 15% rate, while the top marginal rate on ordinary income is 35%. Prior to Bush tax cuts: top marginal: 39.6%. I will have to look up dividends and capital gains, a 20 minute search didn't find it, but I think the maximum capital gains rate was 20% and the dividends rate was the same as for ordinary income.)

[Capt.Rocky300]

8. How many wealthy Senators....

....get much of their outside income in the form of dividends and capital gains? Not to mention stabbing the leader of their party, Pres. Obama, in the back. Scumbags.

[heaven05]

18. exactly

exactly what I was thinking.

[WCGreen]

9. Dividends are earned income and should be taxed as such....

No capping at a favored rate.

[eallen]

17. Seems more like unearned income to me.

Work is hard. I know when I've worked for money, and when all I had to do was let other people work for it.

I much prefer the unearned variety.

Sort of hard, though, to justify taxing that at a lower rate. The problem is that we want to encourage companies to pay dividends. Or to put it another way, we don't want dividends too much penalized vis-a-vis capital gains. The current set-up has the company pay taxes on the money earned before it is dispersed as dividend, then gives the dividend favored rates on the shareholder's income. It might make more sense to treat the dividend as straight earned income to the shareholder, but not require the corporation to pay tax on earnings it disburses as dividends.

[ensemble]

13. One thing I've noticed...

in all this hysteria about a potential tax increase, the press only seems to be concerned about the top marginal rate, and act like poor widows scrapping by are now going to be paying 43% tax.

[brutus smith]

27. Exactly

So many people think they are going to be part of that top 1%. Time to stop worrying about the rich, Repubs have that market cornered.

[DonCoquixote]

14. The DINOs strike again

How soon till Bill Clinton starts saying Obama was wrong for this? I hear him in 3....2...

[progree]

15. On that 3.8% surtax to help pay for health care and the high dividend rates - that's on top earners

The 3.8% surtax to help pay for Obama care is just on those earning $200,000 (individuals) and $250,000 married filing jointly. Per the book, "Landmark, The Inside Story of America's New Health Care Law..." by the staff of the Washington Post, 2010

So don't panic that everyone is going to get hit with a 3.8% income tax surcharge.

As for Obama proposing in his 2013 budget that dividends being taxed at the same rate as ordinary income -- that's only for the upper brackets (probably again the $200,000 / $250,000 income and above).

http://www.bloomberg.com/news/2012-07-12/senate-democrats-still-filling-blanks-in-obama-tax-plan.html

Obama’s budget this year calls for taxing dividends as ordinary income for high earners at rates of up to 39.6 percent, compared with 15 percent now. His previous budgets had called for the top tax rate on dividends to be 20 percent, matching the proposed capital gains rates.

Obama has always said he will keep the Bush tax cuts in place for those earning less than $200,000 / $250,000, which is:

Long-term capital gains and "qualified dividends" -
0% rate for those in the 15% tax bracket and below
15% rate for those above the 15% tax bracket (but below the $200,000 / $250,000)

Short term capital gains and unqualified dividends: taxed as ordinary income (just like now)

[rks306]

25. Taxes must go up

These people do not make things. Use money to make more money. So they want tax cuts which will add to the deficit.

[zbdent]

26. I see the RW talking point about Obama controlling the Senate is still valid ...

[Comrade_McKenzie]

28. Tax the hell out of it... I'll never have to worry about dividends... nt

[24601]

29. Politicians tend to over-complicate dividends. Just exempt the 1st $50,000 and tax he rest as

ordinary income. That will protect a moderate income that relies soly on dividends and subject the rest to existing tax tables. You can even limit that 1st $50K by limiting the exemption via the AMT for higher incomes.