Investors And Experts Propose Extending The Tax Cut On Dividends

Investors And Experts Propose Extending The Tax Cut On Dividends

Investors and Experts Propose Extending the​ Tax Cut on​ Dividends
Investors love dividends,​ and that,​ experts say,​ is​ one reason many Americans are showing deep support for a​ permanent dividend tax cut .​
According to​ results of​ a​ spot survey sponsored by Eaton Vance Corporation in​ March,​ seven in​ ten (70 percent) Americans polled agree that the​ current tax cut established by the​ 2003 Tax Act should remain .​
These sentiments closely resemble those of​ the​ individual investors polled in​ Eaton Vance's 7th annual investor study .​
a​ panel of​ experts at​ a​ recent luncheon hosted by the​ company concurred .​
The event-Divining Dividends: the​ Past,​ Present,​ and Future of​ Corporate Cash Payouts and Implications for Investors-featured a​ panel of​ corporate finance,​ economic,​ tax,​ and capital market experts .​
Discussion focused on​ dividend trends and potential implications for the​ stock market and U.S .​
economy .​
Panelist Alice Rivlin,​ former vice chair of​ the​ Federal Reserve,​ said she was not surprised by the​ favorable response from polled investors who want the​ lower tax rate on​ dividends to​ continue .​
We need to​ broaden the​ tax base so that all tax rates can be lower and ensure that return on​ capital is​ taxed only once and not at​ rates that discourage investment,​ stated Ms .​
Rivlin .​
With the​ current tax cut reducing the​ maximum tax rate on​ qualified dividends from 35 percent to​ 15 percent,​ panelist,​ and senior research analyst at​ Lipper,​ Inc.,​ Tom Roseen described how the​ tax cut has helped many mutual fund investors in​ recent years .​
In 2004,​ funds in​ Lipper's U.S .​
Diversified Equity (USDE) funds macro-classification distributed $12.9 billion more in​ dividend income than in​ 2002,​ but investors paid almost the​ same amount in​ taxes as​ they did in​ 2002,​ declared Mr .​
Roseen .​
Howard Silverblatt,​ senior index strategist at​ Standard & Poor's,​ added to​ the​ panel discussion,​ noting,​ the​ bottom line is​ investors love dividends .​
Quarterly dividends supply not just income to​ live on,​ but can also provide a​ convenient mechanism for dollar-cost averaging through dividend reinvestment programs.
It is​ still unclear when Congress may make a​ decision regarding the​ tax cut extension; however,​ panelists shared their own predictions with the​ audience .​
We won't see a​ permanent solution this year,​ but political trade-offs are likely to​ lead to​ at​ least a​ one-year extension through 2009,​ observed Mark Weinberger,​ former U.S .​
Assistant Secretary of​ Treasury for Tax Policy and current vice chair of​ Ernst & Young .​
Yet,​ despite the​ uncertainty that surrounds the​ potential tax cut extension,​ moderator and executive vice president and chief equity investment officer for Eaton Vance,​ Duncan Richardson,​ added,​ in​ many cases,​ the​ 'right thing' will be to​ return more cash to​ shareholders,​ through dividends,​ causing payout ratios to​ rise over the​ next decade .​
We see the​ coming period as​ a​ golden era of​ equity income investing.
Eaton Vance Corp .​
is​ a​ Boston-based investment management firm whose stock trades on​ the​ New York Stock Exchange under the​ symbol EV.

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