During the recent presidential campaign, both candidates heavily courted the middle class vote in their respective efforts to occupy 1600 Pennsylvania Avenue.
If elected, Obama and Romney both promised to strengthen that particular class of Americans, which, by those tracking such numbers, comprise up to 66 percent of the U.S. population. To uphold their campaign promises, both candidates had to vow not to raise taxes on those making $100,000 or less per year.
Now, with the dust settled from the Nov. 6 General Election and Obama still in control of the White House comes this startling (yet predictable) revelation – campaign promises are directly related to what you would find underfoot in a cow pasture. Those promises are used to get reelected and are not intended to become reality.
Case-in-point is this info I received last week from Dan Weber, president of the Association of Mature American Citizens. Mr. Weber writes – “older Americans – particularly lower income seniors – need to brace themselves for a potentially sharp drop in earnings in 2013 if President Obama has his way and hikes taxes on dividend income. Even if you don’t own dividend paying stock directly, income from other supplemental investments could be sharply reduced.”
As we all know, or I hope we all know, the Bush-era tax cuts are scheduled to expire on Dec. 31. Those cuts put in place by our former President included a popular 15 percent tax rate on qualified dividends.
Additionally, for those Americans earning $200,000 (individuals) or $250,000 (couples) annually, there is a new 3.8 percent tax rate as part of the Affordable Care Act. That new tax will be leveraged against income produced by capital gains, money generated through rental property and, of course, dividends.
Obama’s plan after the Bush cuts expire is to raise the tax on dividend earnings from 15 percent to as high as 39.6 percent (depending on your level of annual income). Of course those paying top tax dollar for dividend income are the ones who can perhaps most afford the higher rates, but what about the little guy.
Weber said the President’s current proposal was done so, “under the guise of forcing the rich to fork over more of their earnings to fund the government. The only problem is that it’s the nation’s retirees (most of which are middle class citizens) who will suffer most of all.”
According to analysts, nearly half of seniors aged 65 and over receive dividend income to supplement retirement benefits. A Federal Reserve survey of consumer finances shows that retirees earning as little as $29,000 a year depend on dividends for 11 percent of their earnings and those earning between $30,000 and $49,000 a year rely on dividends for as much as 14 percent of that income.
“So, it’s not the rich who will suffer, it is those who can least afford the new taxes,” Weber writes. “In addition, if companies start relying on traditional solutions to higher dividend taxes, they will begin reducing their payouts. Again, it is those living on fixed incomes who will feel the pain.”
And the number of older Americans, the majority having some sort of retirement plan linked to income from dividends, is growing each and every day. It’s estimated that one Baby Boomer will turn 65 every 10 seconds for the next 10 years. When you consider that more than 63 percent of taxpayers with income linked to qualified dividends are age 50 and over, it’s not too hard to figure out that the President is aware of those numbers and saw a gold mine to raise more revenue to pay for more reckless programs.
As usual the middle class is left to write the checks.
Cal Bryant is Editor of Roanoke-Chowan Publications. He can be contacted at firstname.lastname@example.org or 252-332-7207.