How We Got Here

In 2003, Congress passed an important law – the Jobs and Growth Tax Reconciliation Act of 2003 – that temporarily and dramatically reduced the maximum tax rate on dividend income from almost 40 percent to 15 percent. Extended in 2006, lower dividend tax rates are now scheduled to expire on December 31, 2010. One of the original goals of the 2003 law was to jump-start the economy and generate investment in the stock of American companies.

On, December 20, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The bill was approved by the House of Representatives on Thursday, December 16, by a vote of 277 to 148, and in the Senate on Wednesday, December 15, by a vote of 81 to 19. This bill extends the 2001 and 2003 income tax cuts for all families for two years.

In a major victory for all dividend-paying companies, the 15 percent maximum federal tax rate on dividends and capital gains paid to individual taxpayers was extended until December 31, 2012.

Many utilities have a history of paying regular dividends, many without interruption for decades or even longer. Thus, this reduced tax rate is a significant benefit to shareholders and makes utilities a more attractive investment. In particular, these investments have helped provide energy utilities with part of the estimated $100 billion they will need during the next 20 years to maintain and expand their infrastructure to meet the growing demand.

Defend my Dividend supports the retention of the 15 percent maximum rate for all taxpayers on a permanent basis. While the two-year extension of the lower tax rate was a victory, it is temporary.