EVANSVILLE, IN--(Marketwire - May 19, 2010) - Carl Chapman, Vectren's (
The 15 percent maximum federal tax rate on paid dividends, which was established in 2003 through the Jobs and Growth Tax Relief Reconciliation Act, is set to expire Dec. 31, 2010. Congressional inaction to date means the current low rates may expire, and congressional reaction to the administration's initial support of a rate increase to 20 percent for only those making more than $250,000 is uncertain.
As such, Chapman, who will take office as president and CEO June 1, advised tax rates on dividends could increase to a rate of up to 43 percent.
"If the lower rate expires, tax rates on dividends for some may increase by nearly 300 percent," said Chapman. "Utility shareholders, many of whom are retired, depend upon dividends for income. Unfairly increasing the tax rate may dramatically impact their household budgets."
Dividends are currently taxed twice: once at the corporate level and then again at the individual level when income taxes are paid.
According to a study commissioned by the American Gas Association (AGA) and the Edison Electric Institute (EEI), shareholders who own utility stock are middle class people, 86 percent of whom are over age 50. Furthermore, about 65 percent have incomes less than $100,000, and nearly 40 percent have incomes less than $50,000.
"Expiration of the lower rates will not only impact shareholders but also the value of utility stocks," added Chapman. "Given the constant need of utilities to attract capital to fund key infrastructure investments, we're very concerned about what this could mean when it comes to retaining and attracting investors."
Chapman urged attendees to visit the Defend My Dividend web site, http://www.defendmydividend.org, which assists a national grass roots effort to push federal legislators toward action to maintain the existing tax rate. Via the site, shareholders can sign a petition and access members of Congress.
Vectren has been a key supporter of the Defend My Dividend Advocacy program to permanently extend the 15 percent maximum tax rate of dividend income. Through its partnership with the AGA and the EEI, Vectren and other utility companies have joined forces to encourage lawmakers to not increase the dividend tax rate.
Indiana shareholders are also encouraged to engage in the Indiana Utility Shareholder Association (IUSA) by visiting http://www.iusaonline.org. IUSA is also participating in the Defend My Dividend effort to bring additional pressure on lawmakers.
About Vectren
Vectren Corporation (
Contact Information:
Media contact:
Chase Kelley
(812) 491-4128