The Jobs and Growth Tax Relief Reconciliation Act of 2003 changed the tax treatment of corporate dividends for most taxpayers. The result is noticeably higher dividend payouts by corporations today than prior to the passage of the 2003 legislation. This discussion analyzes the impact of the 2003 Act.
Read the section "Capital Gains and Dividend Tax Treatment Extended to 2010" from your textbook (p. 569). Respond to the following:
- Why do companies issue stock dividends?
• How might the expected future reappearance of higher tax rates on individuals receiving dividends affect corporate dividend payout policies?
• What effect did the Jobs and Growth tax Relief Reconciliation Act of 2003 have on the taxation of corporate dividends? What effect did it have on corporate payouts?
• What benefit is available to participants in a dividend reinvestment plan? How might a company benefit?