Dividend Tax Briefing Fall 2010

1. Dividend Tax BriefingFall 2010

2. Lower Dividend Tax Rates Will Expire December 31 • Congress passed a law in 2003 that temporarily reduced tax rates on dividends • Current capital gains tax rate is 15%; maximum tax rate will rise to 20% at end of year if Congress does not extend current rates If Congress allows current rates to expire: * Married individuals filing joint returns.

3. Our Objective • Stop a dividend tax hike for everyone. • Retain lower dividend tax rates for all taxpayers.

4. Talking Points • The maximum tax rate on dividend income will soar as much as 164%—from 15% to 39.6%—if Congress doesn’t act to stop a dividend tax hike. • 27 million Americans from all income levels and age groups directly own stocks that pay dividends. Tens of millions own dividend-paying stocks indirectly through pension funds, 401(k) plans, IRAs, mutual funds, or life insurance policies. • Raising dividend tax rates to previous levels will create a tax policy that favors capital gains over dividends. Maintaining parity between tax rates for dividends and capital gains is essential so tax policy doesn’t favor growth stocks and debt investment over dividend-paying investments.

5. Talking Points • Raising dividend tax rates would disadvantage the largest dividend-paying sectors, such as electric and natural gas utilities, making it more difficult to finance critical infrastructure projects that are sources of high-quality job creation. • Raising taxes on dividend income—even just for higher-income taxpayers—would affect ALL taxpayers who receive dividends by discouraging investment in dividend-paying companies and potentially lowering dividend payments for everyone.

6. Media CoverageChanging the Conversation Don’t Let Tax Cuts Expire At Year-End One Nation, Two Deficits Editorial Hold off on tax increases while the economy lags Now Not Time to Raise Dividend Taxes By Senator Johnny Isakson By Peter Orszag Former White House Budget Director September 6, 2010 July 27, 2010 August 7, 2010 By Anthony F. Earley, Jr. August 10, 2010 Higher Taxes on Dividends Will Discourage Investment and Retard Economic Recovery Hiking tax rate will really hurt Floridians August 9, 2010 By Lew Hay September 4, 2010

7. Experts Continue To Weigh In One Nation, Two Deficits By Peter Orszag September 6, 2010 “In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether.” “… permanently extending tax cuts put in place under President George W. Bush would provide a ‘considerable’ economic boost over the next several years ...” August 20, 2010 Keeping Tax Cuts Beneficial in Short Term, Harmful Over Long Term, CBO Says

8. Contentious Political Debate • “At a minimum, the House will not extend the tax cuts benefiting taxpayers of incomes above $250,000 despite some suggestions in the Senate that they be extended along with all other Bush tax cuts.” – House Majority Leader Steny Hoyer (D-MD) • “The fact is, we have to be acting in a fiscally sound way. And we can't afford those [tax cuts]. We never could.” – House Speaker Nancy Pelosi (D-CA) • “I am concerned that extending capital gains and dividends tax relief would provide limited benefits to those taxpayers who need them most while burdening our children with a mountain of debt.”– Senate Majority Whip Dick Durbin (D-IL)

9. Contentious Political Debate Stakeholder Outreach and Results • “As a general rule, you don’t want to be cutting spending or raising taxes in the midst of a downturn.” – Senate Budget Committee Chairman Kent Conrad (D-ND) • “We don’t need to raise taxes now… We don’t need added uncertainty, added burdens on business right now.” – Senator Evan Bayh (D-IN) • "My fear is that not extending those tax cuts is equivalent to instituting a tax increase at a very critical and challenging time for the economy. I will vote to extend those tax cuts for some period down the road." - Senator Ben Nelson (D-NE) • “In a recession, you don’t tax, burden and restrict. The economy is likea ship, and if you sink the ship, all the good you might do goes down with it.” – Representative Bobby Bright (D-AL) • “Given the unique economic difficulties we face as a nation, this is the wrong time to raise these taxes. We need to retain these tax cuts that encourage investment that stimulates growth and job creation.” – Representative Harry Mitchell (D-AZ)

10. Legislative Update • Rep. John Adler (D-NJ) and 47 Democrat House members sent letter to Speaker Pelosi supporting extension of current dividend and capital gains tax rates • Legislation to extend current tax cuts introduced by Minority Leader Mitch McConnell (R-KY) • Senate Finance Committee Chair Max Baucus (D-MT) likely to introduce legislation that echoes President Obama’s plan • Congress out until after November elections

11. The Challenges “President Obama on Wednesday will rule out any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.” Obama Will Not Extend Bush-Era Tax Cuts to Wealthy September 8, 2010

12. Defend My Dividend Take Action Center now offers an easy option to call your Members of Congress, at 1-877-781-4688.