Dividend Tax Relief: Helping Or Hurting Our Economy?

Dividend tax relief allows investors that receive dividend earnings to reduce the tax rate paid on dividends. Under the Tax Increase Prevention and Reconciliation Act of 2005, the top dividend tax rate is 15 percent. Low-income earners are taxed 5 percent on their dividend income. This cap was meant to eliminate the double taxation of dividends, which represent a distribution of profits by the company.

For Dividend Tax Relief

Some argue that the elimination of the double taxation of dividends results in more investors entering the market without fear of unnecessary taxation. This increased investment activities helps companies acquire the capital needed to expand and grow their business, which is a net economic boon for the economy.

Against Dividend Tax Relief

Others argue that dividend tax relief gives the rich another opportunity to lower taxes. They do not agree that the lowering of dividend taxes results in increased investments and view this incentive as a benefit only for the rich. Whichever side you are on with regards to this question depends on your thoughts about taxation.