More on Dividends and Capital Gains Taxes

Earlier I suggested that high dividend stocks might outperform low dividend stocks in the wake of capital gains tax increases. This analysis didn’t properly account for changes to the dividend tax rate. According to the Wall Street Journal, the Senate Budget Committee passed a fiscal 2011 budget resolution that includes plans to raise the top tax rate on dividends to 39.6% from 15%.  Adding on the 3.8% surcharge on investment income from the health care bill raises the top rate to 43.4%. This change would completely counter any relative benefits high dividend stocks get from a higher capital gains tax.

Image002

About

I studied Bioengineering at the University of California at San Diego. While there I served as a trustee on the investment committee of the UCSD Student Foundation, a group that manages an endowment to fund scholarships. While in college I applied my interest in finance and economics by working as a summer associate at Clarium Capital Management, working part time my senior year, and joining full time when I graduated in 2006, staying there through August 2010. I am currently working as a portfolio manager at another global macro hedge-fund in the Presidio (And blogging about more directly market related ideas at their restricted blog). I’ve been focusing on quantitative finance, currencies, commodities, the interplay between finance and politics, demography and other long term trends.

Disclaimer: You shouldn’t consider anything on this site to be a recommendation or solicitation to buy, sell, or hold any securities or commodities. I’m not offering you investment advice. I or the company I work for may hold positions in securities that I mention.