The Tax Of A Dividend Tax

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A dividend tax is an income tax paid on the earnings from a corporation that is distributed to its shareholders. Dividend payments are treated as ordinary income, and they are taxed as if the taxpayer had earned income through active work. Presently, there is much controversy surrounding dividend tax. The government taxes dividends twice: It first taxes corporate income, then taxes the same income again when shareholders receive dividends paid out of corporate income. The double taxation raises the questions of whether the tax should be eliminated, and which taxes should be cut.
The dividend tax was introduced in 1936 by President Roosevelt in the New Deal (Levey). The Economic Growth and Tax Relief Reconciliation Act of 2001 introduced lower dividend tax rates (NATP 2001). On May 23, 2003, President Bush signed the Jobs and Growth Tax Relief Reconciliation Act of 2003, which gained momentum to passing the tax changes, and was supposed to expire in 2008 (NATP 2003). Then on May 17, 2006 the reduced rates were extended an additional two years by the Tax Increase Prevention and Reconciliation Act, into 2010 (NATP 2005).
There are two ways used for the purpose of calculating dividend tax, and they are known as qualified dividends and non-qualified dividends. Qualified dividends are stocks held more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. These dividends are taxed at 5 percent if the investor is below the 25 percent personal

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