EEI President Kuhn Welcomes Introduction of Legislation Extending Lower Dividend Tax Rate

Washington, DC () - EEI President Tom Kuhn today applauded new legislation that would permanently extend the current 15-percent federal tax on dividends and capital gains, saying the move will continue generating new jobs, stimulating the economy and benefiting millions of middle-income American households.

"This important legislation will help perpetuate the widespread benefits that began back in 2003, and allow more American households to keep a greater portion of their dividend income," said Kuhn of H.R. 2312, introduced today by Reps. Eric Cantor (R-Va.), Phil English (R-Pa.) and Paul Ryan (R-Wisc.). Identical legislation has been introduced in the Senate by Sens. Mike Crapo (R-Idaho) and Jon Kyl (R-Ariz.). "This is an example of federal tax policy that absolutely works across the board," Kuhn said.

Originally enacted in 2003 and extended by Congress last year through 2010, the lower federal rate on dividends and capital gains has been a boon for the U.S. economy, helping to generate almost eight million new jobs, fuel a 40-percent surge in the stock market value and nearly triple U.S. economic growth, Kuhn said.

Significantly, much of the economic benefit has gone to seniors and middle-income families, Kuhn said. In 2005, a total of $112 billion in dividend income qualified for the lower tax rate; one in five American families received dividends and 70 percent of those families had household incomes under $100,000, Kuhn said.

In 2004, more than 24 million American families realized an average $950 tax cut on their federal income tax returns from the dividend and capital gains provisions, Kuhn said. Seven million of those families were headed by senior citizens, who realized an average tax cut of $1,231.

The 2003 tax law change also ignited a resurgence of business investment, which has grown by 6.6 percent annually following nine quarters of declines before the new rate went into effect. "This is a particularly crucial for capital-intensive industries such as electric utilities, which are now entering one of the biggest infrastructure investment cycles in several decades," Kuhn said. "The lowered dividend rate has bolstered investment in our sector, strengthened our utilities' credit quality and reduced the cost of capital needed to do the job of reinforcing the nation's transmission grid, building new generating capacity and improving the nation's environment." Utility sector capital expenditures, for example, rose 14 percent in 2005, jumped 25 percent last year and are expected to continue rising steadily.

The number of U.S. companies paying dividends also has surged, said Kuhn, noting that the lower tax rate helped reverse a 25-year decline in dividend payments. "Last year, 64 percent of shareholder-owned electric companies increased their dividend payments, the largest percentage since 1993," he said.

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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.