I am confused about the democrat tax on dividends?

Discussion in 'Politics' started by prc117f, May 19, 2008.

  1. prc117f


    I just started out investing for my retirement. I opened an etrade account a bought dividend paying stocks and had etrade reinvest the dividends into my stock.

    I am not rich by any means I just live below my means (no car payments for years, still driving my 98 corolla)

    Is that true that democrats are going to tax dividends at 28% That does not seem to fair since I am saving for my retirement. Or is this over 15% tax for people making who fall in income brackets over 200k etc?

    Anyone make sense of all of this?
  2. TGregg


    It's pretty basic. If you work for a living (meaning you don't get some sort of direct aid from the government like food stamps, welfare, medicaid, etc) then you are "rich", a "winner in life's lottery" and "not paying your fare share". All these things democrat speak for "We's gonna tax yo @$$".

    It won't matter who wins the Whitehouse. Obama has already said he's raising taxes. McCain hates republicans so much he might just do it out of spite. Even if he doesn't, a democratic Congress will see to lots more taxation.

    Now that Marx's class warfare is soundly implanted into America, bigger government, higher taxes, more regulation and laws and the corresponding stagnant economy are our future. But at least the "rich" get screwed, too. If we as a country cannot refrain from demanding handouts from the government, then we don't deserve to live in the prosperous society of liberty.
  3. Arnie


    The Next President -- and Your Investments
    May 18, 2008

    This longest and most intense of Presidential campaigns continues ahead full apace and is likely to intensify in the coming months. With Barack Obama coming closer to edging out Hillary Clinton for the Democratic slot, the action will shift to the battle between the prevailing Democrat and Republican John McCain.

    Usually, investors, especially long-term investors, shouldn't care deeply about who wins Presidential elections. But this time, it makes sense to pay more careful attention.

    A common misperception is that stock markets do better with Republican presidents. According to a recent study by Capital IQ, a financial-markets research and data firm in New York, Democratic presidencies have seen stronger market gains on average than Republican presidencies over the past 50 years.

    Gridlock Is Good

    The market also performs better when the White House and Congress are controlled by different parties, partly because in that scenario each party can curtail the excesses of the other.

    What's in store this year? November results are famously difficult to predict at this point in an election cycle, but most indicators strongly foretell gains for the Democrats in Congress. Many polls would seem to indicate a Democratic presidency as well, but most prognosticators, citing the highly personal nature of a Presidential race, think the fall vote will be close.

    So, how should investors plan for this raucous election? First, don't get too caught up in the noise. Your long-term strategy, which should include a diversified portfolio and steady contributions to your retirement investment plan, should be designed to weather political gyrations.

    All that said, given eight years of a single administration, just ignoring the election doesn't make complete sense either. Depending on how the race unfolds, some portfolio tweaking may be in order.

    Focus on Taxes

    Candidates talk a lot about "change," "hope" and "courage," but investors should race past the rhetoric and focus first on tax policy. Political decisions about taxes can have a big impact on investing decisions, and you want to get ahead of any potential changes.

    Two key taxes for investors are the capital-gains tax and the tax on most stock dividends. The top rate on capital-gains was reduced to 15% during the Bush administration.

    Sen. Obama has indicated he would raise the capital-gains tax, though he has hedged on how high he would go. Last fall, which seems like another time in this campaign, he said he'd favor nearly doubling the tax to 28%. He has since backed off that figure. Sen. Clinton also favors increasing the capital-gains tax rate. Sen. McCain has said he'd keep the current capital-gains tax rate steady.

    For investors, a win by Sen. Obama or Sen. Clinton would mean taking a hard look at some of your strongest gainers and perhaps taking those gains this year at the current rate of 15% or less.

    It's possible that you could take those gains next year ahead of an increase in the capital-gains rate, but it would depend on whether or not a tax change applied retroactively to all of 2009 or was enacted on a going-forward basis. If the Democrats sweep into strong power in both Congress and the White House, waiting on your capital-gains strategy might be unwise.

    The dividend tax rate, reduced to a maximum of 15% during the Bush administration, could also come under pressure if the Democrats take the White House. Both Sens. Obama and Clinton want to return to taxing dividends as ordinary income, on which top earners currently pay tax at a 35% rate. (The Democratic candidates also favor raising the top rate on ordinary income.) Sen. McCain pledges to hold the dividend rate steady.

    Many investors moved to blue-chip, dividend-paying stocks to take advantage of the lower rate during the Bush administration. If dividends are again taxed as regular income, investors should consider moving some of their assets from dividend-paying blue chips into tax-free bonds or "growth" stocks of faster expanding businesses. Growth stocks usually deliver more of their return in the form of price appreciation rather than dividends.

    Even if Sen. McCain wins the election, the dividend and capital-gains tax rates could face pressure from a Democratic Congress, especially if the Democrats, as anticipated by many analysts, win a bigger majority in the fall. Also, both the capital-gains and dividend tax rates are set to return to earlier, higher levels in 2011 when a portion of the Bush tax cuts expire. So, even with a Sen. McCain win, you'd want to keep a careful eye on capital-gains and dividend tax policy.

    Continuing Themes

    Some trends should remain strong investment themes regardless who wins the White House. Focusing on these will soothe you when the race becomes especially nasty.

    For instance, few people expect any dramatic change in the nation's trade and fiscal deficits. As a result, pressure on the wilting dollar is unlikely to ease. That means investors should have a portion of their portfolios focused on overseas markets. A weaker dollar amplifies gains made overseas when translated back into the U.S. currency.

    Also, demand for natural-resource commodities won't alter dramatically anytime soon. Demand from China and India, as well as from the developed world, for food, energy and other commodities will remain robust. Having some exposure to commodities through a natural-resources mutual fund is another way to reduce fretting about the outcome of the fall contest.

    Dave Kansas is the president of FiLife.com, a personal-finance Web site owned by Dow Jones & Co. and IAC Corp.
  4. prc117f


    That is the confusing part. The dividend tax so Obama is going to tax it like ordinary income now?

    That does not sound good for people investing today to retire tomorrow. I guess the savers are going to get penalized so they can bail out the home flippers and the people who chose to drop out of school and not learn a trade.