Please support the dividend tax cut extension

(Story by Chris Amatos)

AEP employees and retirees have sent more than 3,000 messages encouraging members of Congress to extend a lower tax rate on corporate dividends, but more are needed.

AEP is supporting a multi-industry effort led by the Edison Electric Institute (EEI), the electric utility industry’s primary trade group, to encourage Congress to extend the lower rate on corporate dividends. The 15 percent tax rate, first enacted in 2003, will expire at the end of this year if Congress does not act.

AEP President and Chief Executive Officer Nick Akins asks all employees and retirees to contact their U.S. representative and senators through the EEI Defend My Dividend website. The address is http://www.defendmydividend.org/aep/Pages/default.aspx.

“This is a critical issue for AEP and for all dividend-paying companies,” Akins said. “A lower tax on corporate dividends makes investments in companies such as AEP more attractive and increases the value of our stock. Every employee and retiree who owns a stock that pays dividends, including shares held in the AEP 401(k) or an IRA, benefits from this lower rate.”

If the lower rate expires, the tax rate on corporate dividends and capital gains reverts to the individual taxpayer’s marginal rate, which could be as high as 39.6 percent for high-income taxpayers. That’s almost a three-fold increase.

And while many people associate corporate dividends with wealthy individuals, a large segment of taxpayers across all income levels receive corporate dividends, according to a study commissioned by EEI. The study, conducted by Ernst & Young, found that 68 percent of all tax returns in 2009 that included dividend income were for incomes of less than $100,000 and 40 percent had less than $50,000 in income.

“Because so many people invest in mutual funds, either through a retirement account or on their own, this tax increase will hurt millions of moderate-income Americans,” Akins said. “Based on the precarious state of our economy, this is not a good time to enact a broad-based tax increase on middle-income taxpayers.”

According to news reports, the U.S. Senate may begin debate on the tax-cut extension this week while the House may take up the issue beginning July 30.