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.