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If Congress does not act, on December 31, 2010, investors from all walks of life – whether individual retirees or pension fund managers – will face markedly increased taxes on their dividend income.  In fact, the maximum dividend tax rate will jump from the current 15 percent to almost 40 percent!

I was just in Albuquerque, New Mexico, speaking to more than two hundred investors who are concerned about what the future holds for them.  This event, an annual luncheon for members of the New Mexico Utility Shareholders Alliance, brought home to me the importance of face-to-face advocacy.  I had been invited to talk about this very issue and to let everyone in the room know that someone was looking out for them.

Looking out for America’s Investors

As the leading national grassroots advocacy organization dedicated to preserving fair and reasonable dividend tax rates, Defend My Dividend (DMD) is leading the fight to protect investors who depend on their dividends to make ends meet, to plan for the future and to provide themselves with a sense of security.

DMD is actively supporting proposals by President Obama and Senate Finance Committee Chairman Max Baucus (D-MT) to make permanent the current capital gains and dividend tax rates for the majority of Americans while capping the rate at 20 percent for higher-income families. Over the summer, Chairman Baucus introduced legislation that mirrors the capital gains and dividend policies in President Obama’s fiscal year 2010 budget.  They are sensible goals that support America’s investors and promote investment in the companies and businesses that are moving this country forward.

How We Got Here

Prior to 2003, dividends were taxed as ordinary income, with a maximum rate of 35 percent. After 2003, dividends were taxed at a 15 percent rate for all taxpayers. In 2006, Congress extended that dividend provision through 2010, while also lowering the tax rate to zero for the two lowest federal brackets.  Without action by congress, the dividend tax rate will rise to a maximum of 39.6 percent – in tough economic times, that’s just wrong.

This Really Does Affect Everyone

Many Americans depend on their dividend checks to supplement household income.  But did you know that lower dividend rates also help to attract much-needed capital for local energy utilities?  That’s important, especially at a time when utilities are making major investments in power generation and delivery facilities.

This is real money and it impacts real families.  In fact, the dividend tax rate reduction benefits more than 24.5 million households – 59 percent of which have incomes less than $75,000.  24 percent of households receiving dividends had incomes below $25,000. And 72 percent of households receiving dividends had incomes below $100,000.

Even if you don’t receive dividends yourself, if you invest in a 401(k), are part of a pension plan or even have shares of a mutual fund, dividends are probably a bigger part of your life than you realize.

DMD is preparing to step up its national grassroots campaign in 2010 by drawing attention to this one-year countdown and ensuring that congress supports President Obama and Chairman Baucus.

DMD is also expanding its message to make sure that every American understands that now more than ever, the fate of the dividend tax affects everyone.

To learn more about DMD and to learn how you can make your voice heard, visit www.DefendMyDividend.org today.

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In light of the President Obama’s budget and Senate Finance Committee Chairman Max Baucus’ supporting legislation, the campaign recently retooled its Web site (www.DefendMyDividend.com) and refined its messaging to commend the president and chairman who have both made statements in support of maintaining and making permanent the 15 percent dividend tax rate for a vast majority of Americans and capping the rate at 20 percent for other taxpayers.

In this video clip, I have a chance to discuss the DMD campaign and other key issues with Mandy Clark, Executive Director of Utility Shareholders of Florida.

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In 2003, Congress temporarily reduced the maximum tax rate on dividend income from 38.6 percent to 15 percent.  As a result, this lower tax rate has meant that utility shareholders can keep more of their dividend income.  It has also spurred investment in dividend-paying companies such as utilities, that rely on the new capital to build pipelines, transmission wires, power plants, and make investments in new energy efficiency and environmental technologies-all to keep pace with the country’s continually rising demand for energy.

Unfortunately, the current 15 percent maximum tax rate on dividend income is set to expire at the end of 2010-unless Congress takes action now to extend or make it permanent.  Without any action, the new maximum tax rate on qualified dividends could increase to more than 39 percent for some taxpayers.

The dividend issue is particularly important today, given the slowing economy and credit crisis. Senior citizens make up the largest number of utility shareholders-64 percent of utility shareholders are 65 years or older.  Middle- and low-income households also are affected by the dividend tax rate issue.  Sixty-eight percent of those receiving utility dividends have annual incomes of $75,000 or less, and 42 percent of utility shareholders earn less than $25,000 per year. These shareholders rely on their quarterly dividend checks to help with everyday expenses.  They would be particularly harmed if the higher tax rate on dividends went into effect.

This past November, nearly 60 utilities met to discuss, plan and launch “Defend My Dividend” (DMD), a joint campaign of AGA and EEI to convince Congress to make permanent the 15 percent tax rate on dividend income.  The DMD campaign is amplifying and focusing the full grassroots power of the country’s natural gas and electric utility industries.  Working together, the DMD campaign is now telling Congress that millions of average Americans across the country depend on dividend income to heat their homes or pay for medicine, food and other essentials, and they do not want to pay higher taxes on these crucial earnings.

The campaign’s web site, www.DefendMyDividend.org, offers more information about the campaign, as well as updates, and importantly, a way for you to join the effort to renew the lower tax rate on dividends.  Please visit the site today, and tell other utility shareholders, along with your friends and family, about the site too.  We need everyone’s voice to make a difference in keeping today’s 15 percent tax rate on dividends permanent.

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