Top Dividends Tax Rate on Track to Hit 68 Percent in 2011, Report Warns

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The top tax rate on dividends will rise to 68 percent in 2011 when combined with the effects of the expiration of the 2001 and 2003 tax cuts, the new health care surtax, and the “double tax on corporate profits,” the Tax Foundation says in a report. The group says the double tax on corporate profits imposes a combined federal-state corporate tax rate of 39.1 percent on businesses as well as a top tax rate of 17.3 percent on dividends distributed to individual shareholders. “With the sunset of the 2003 Bush tax cut at the end of 2010, which will increase the federal dividend tax rate from 15 percent to 39.6 percent, and the new Medicare tax on investment income of 3.8 percent, the integrated effective dividend tax rate will rise dramatically to 68 percent,” the Tax Foundation says.