Fiscal Cliff Package Maintains Parity Between Dividend
and Capital Gains Tax Rates
Utilities Now Focus on Comprehensive Tax Reform in 2013
WASHINGTON, DC – On Tuesday night, Congress reached an agreement on a fiscal cliff package that maintains parity between the tax rates on dividends and capital gains.
“We are pleased that the final agreement recognizes that our tax code should not pick winners and losers – that we should treat dividends and capital gains equally,” said EEI President Tom Kuhn. “While there is still more work to be done to reform our tax code, Congress and the Administration took the necessary steps to prevent the largest tax increase in history from occurring, a tax increase that would have affected virtually every American.”
The agreement permanently sets the top tax rate for both dividends and capital gains at 20 percent for couples earning more than $450,000 ($400,000 for singles). For taxpayers below these thresholds, dividends and capital gains will continue to be taxed at the current rates of 0 percent and 15 percent, depending on a filer’s income level. These rates have also been made permanent. [The health care legislation enacted in 2010 imposes a 3.8-percent Medicare tax on all investment income beginning in 2013 for couples earning more than $250,000 ($200,000 single)].
Utilities traditionally offer dividends as a way to attract investors and raise capital in the equity market. A pronounced shift away from dividend-paying stocks by investors would hurt the share values of these companies that stretch across many industries. Lower share values weaken the economic – and retirement – security of millions of Americans who hold those stocks directly, or own an interest in the shares indirectly through retirement plans, life insurance policies or other savings vehicles.
In 2012, the electric utility industry spent a projected $94 billion to build a cleaner generation fleet; reinforce the nation’s transmission and distribution systems; meet environmental requirements; deploy smart grid technologies; and improve the ability of the electric grid to respond to emergencies and cyber threats. These long-term investments produce jobs and create significant, positive impacts for the economy and the entire country.
With the fiscal cliff tax legislation passed, we encourage Congress and the President to turn their attention to the larger issue of comprehensive tax reform in 2013.
“We look forward to working with Congress and the Administration on a whole host of financial issues critical to our industry, such as addressing the debt/deficit, corporate tax rates, accelerated depreciation, interest deductibility on debt and normalization treatment,” added Kuhn.
The Edison Electric Institute (EEI) is the association of U.S. shareholder-owned electric companies. Our members serve 95 percent of the ultimate customers in the shareholder-owned segment of the industry, and represent approximately 70 percent of the U.S. electric power industry. We also have more than 65 International electric companies as Affiliate members, and more than 170 industry suppliers and related organizations as Associate members.