US utilities fear approach of fiscal cliff
Source: FT
The largest US utilities blitzed Capitol Hill this week to lobby for a deal to avert the effects of the “fiscal cliff” on their industry, warning that increases in tax rates on dividends could damage their normally steady shares and delay investments in the country’s electrical grid.
Much of the political attention in the budgetary standoff – which could tip the US into recession at the beginning of next year – has been focused on scheduled hikes in Bush-era individual income tax rates, as well as reductions in the Pentagon budget.
The “fiscal cliff” refers to the simultaneous expiry of tax breaks with the introduction of tax increases and spending cuts at the end of 2012, the cumulation of which could push the US back into recession.
Among the fallout – if Congress fails to take any action before December 31 – is a significant increase in taxation on investment income, with tax rates on capital gains increasing from 15 per cent to 20 per cent, and tax rates on dividends rising to 39.6 per cent for top earners.
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