A New York Times editorial faults Senate Democrats for failing to go along with President Obama's plans to raise the top federal individual income tax rate on dividends to 43.4% from the 15% rate that now applies. Says the Times editorial: "The bill is not perfect; it taxes dividends at about half the rate proposed by President Obama, which is a benefit almost entirely for the rich."
The idea that "the rich" are "almost" the only ones who collect dividends is not supported by evidence. A study prepared by the accounting firm Ernst & Young LLP for the Edison Electric Institute and published in May 2012 reported the following IRS statistics:
The IRS SOI [Statistics of Income] reports that 25.4 million tax returns included qualified dividends in 2009, representing $123.6 billion of qualified dividends. The tax returns with qualified dividends have the following profile: 63 percent are from taxpayers age 50 and older, 32 percent are from taxpayers age 65 and older, 68 percent are from returns with [adjusted gross] incomes less than $100,000, and 40 percent are from returns with incomes less than $50,000.
The New York Times Company suspended its own dividend in 2009, so it's somewhat self-serving for the newspaper to favor increased dividend taxes; the company's owners would not be subject to them. It's a "don't tax me, tax the guy behind the tree," move. But with the Federal Reserve setting interest rates so low that U.S. government bonds, bank CDs, and savings accounts don't provide much income, plenty of middle class retirees or savers have turned to dividend-paying stocks, either directly or through mutual funds, to provide some income as part of a savings investment strategy. The definition of "rich" can be income-based, asset-based, or based on some other definition. The Times doesn't give a definition in the context of its comment about dividends, which in any case have usually already been taxed once at the corporate level anyway.
The Edison Electric Institute advocates for utility companies that tend to pay out a lot of dividends, so one might discount what they say. But the IRS statistics are the IRS statistics. Many savers, both rich-and non-rich, may try to stick dividend income in tax-preferred accounts like IRAs or 401Ks or 529s. Anyway, that's all a long way of saying that there are plenty of the non-Sulzberger, non-rich out there with some dividend income, contrary to what the Times editorial says.
Update: A FutureOfCapitalism community member-watchdog-participant-content-co-creator writes in: "If the gap between the dividend tax rate and the long term capital rate is too wide, companies will buy back more stock instead of increasing dividends....To summarize, raising the taxes on dividends raises the equity cost of capital and therefore changes how capital is allocated. A higher cost of equity will favor the greater use of debt financing and increase financial leverage in corporate America. That might be compelling in today's low interest rate environment but could be catastrophic if rates go up or worse, we have a liquidity crisis such as when Lehman failed. It is quite naive of the NYT to think there will be no consequences of changing the price of equity capital."