Let’s say it’s thirty years from now, and you’ve been a solid middle-income earner your entire life.  You were able to put some money in dividend stocks and mutual  funds that pay a dividend.

With your dividend portfolio, you get by fairly nicely.  You might even be able to go on vacation every now and then.

But times have changed and even though you worked hard your entire life, the government and certain people in the population want to tax those dividends now because they view dividend income as a rich person’s income stream.  But what those who want to tax dividends at higher rates don’t realize is that there are also adverse side effects of doing this.

Believe it or not, but when you don’t have money in retirement and you are hunger, you still have to pay for the food somehow.  If your dividends income stream is cut because of higher taxes on them, then you might have to go back to work.  This in turn makes it harder for young people to get jobs, since the elderly and the young compete for the same entry-level jobs.

I have friends with retired parents who told me a few years ago that it was getting financially harder every year because of the cost of living and inflation.  You see, to them increases in gas prices and food have a direct impact on what they can afford.  I’m sure they aren’t going to be happy once they see that their small dividend portfolio provides less money because of the possibility of dividends being taxed.  I wonder if you’ll see them working at McDonalds soon?  Perhaps not, they getting pretty old.  It’s harder to work when you are older…

Dividends provide them with only part of their income steam.  Luckily they have pensions, and a Social Security income steams.

Too bad we won’t.

What do you think about taxing dividends at a higher rate?  After all, money to pay dividends is already taxed once as company income (double taxation anyone?)…

Share your thoughts,

MR