Will higher taxes lead to a sell-off in dividend stocks? Not so fast

  • Article by: MATTHEW CRAFT , Associated Press
  • Updated: November 18, 2012 - 11:34 AM

NEW YORK - If Washington allows tax cuts to expire at the end of the year, taxes on dividends will nearly triple for the highest-paid Americans. That's led some experts to warn of a looming collapse for popular dividend-paying stocks. When Uncle Sam charges a higher tax on something, they reason, it drives people away.

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traderbillNov. 25, 12 8:05 AM

Once Larry Kudlow and Jim Cramer blabbed on CNBC that the dividend tax should be cut by saying millions of Americans own stock and would thus benefit, it became embedded in the Bush tax cuts. But the truth is that those 'millions' own stock in IRA's, 401'k's, and other tax-advantaged instruments which will be taxed as ordinary income when withdrawn! Think about that...once again, we were duped into giving the wealthiest Americans another tax break, one that costs the rest of us. How many are selling their dividend paying stocks in fear of higher taxes? Apparently quite a few because in a little more than a month Dow Utilities have fallen 9.2%! The sky is falling! Buy sky! Watch as the debate begins and you, who subsidized the tax breaks for the wealthy have a chance to buy those dividend payers at lower prices, which means higher yields. Fear of taxes drives human emotion, not facts. The Democrats, in trying to show they are for the little guy failed to point out that the cuts aren't to be just for those making less than $250,000 (for a married couple) but for the FIRST $250,000 of income. So if you are making $300,000 you will probably still be better off than if the Bush tax cuts are repealed. Too bad taxes make us think so emotionally rather than rationally.

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