October 12, 2012
Robert Spielman, Tax & Business Services Partner, Quoted in The Wall Street Journal Article "Dividends: Start Screaming"
By Jason Zweig
Enough about the ”fiscal cliff.” What about the dividend cliff?
At one second after midnight on Jan. 1, 2013, the maximum tax rate on dividends is likely to go from 15% to either 18.8% or 43.4%. The best-case scenario: Congress retains the top dividend-income tax rate of 15%, and the only increase is the scheduled 3.8% surtax on investment income for high earners. The worst case: Congress decides dividends are to be taxed at ordinary-income rates, and the highest rate jumps to 39.6%, plus the same 3.8% surtax.
In just the first two weeks of January 2012, U.S. public companies paid $16.1 billion in dividends, according to Robert Gordon, a tax expert at Twenty-First Securities in New York. If they pay at approximately that rate again, shifting those distributions a few days earlier so they fall before the end of this year would make a significant difference to investors' after-tax wealth.
”I am advising all my wealthy clients [who own private corporations] to pay their dividends this year” before rates rise, says Robert Spielman, a tax accountant at Marcum LLP in Melville, N.Y. ”So why shouldn't public companies who care about their shareholders' well-being do the same thing?”