The special breaks and deduction that make up Americas tax code are massively confusing. Most people are totally ignorant of tax law and have no idea what they are talking about when they express an opinion on what policy changes should be made,or how they will effect the economy. In 2003, President Bush proposed to eliminate the U.S. dividend tax saying that "double taxation is bad for our economy and falls especially hard on retired people", this is questionable. He also argued that while "it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits." This formed the bases for the following tax table.
Soon after, Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003, "JGTRRA"), which included some of the cuts Bush requested and he signed into law on May 28, 2003. Under the new law most dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers. Qualified dividends received by individuals in the lower 10% and 15% income tax brackets taxed at 5% from 2003 to 2007. The qualified dividend tax rate was set to expire December 31, 2008; however, a tax bill in 2005 extended the lower tax rate through 2010 and further cut the
tax rate on qualified dividends to 0% for individuals in the 10% and 15%
income tax brackets. In December of 2010, President Obama signed into
law the Tax Relief, Unemployment Insurance Re-authorization and Job
Creation Act of 2010. The legislation extends for two additional years
the changes enacted to the taxation of dividends in these laws.
What happens to the tax rate on dividends will have more effect on high income earners that receive this type of income then the tax rates now being debated. Other tax issues of major importance have been placed on the back burner but must be addressed, these include the Inheritance Tax, and the Minimum Alternative Tax. With only thirty present of taxpayers itemizing deductions the explosive implications of capping certain deductions will soon resurface as will several tax credits that cost the government revenue. This needed debate will go on for a long time.