The Key West citizen. [volume] (Key West, Fla.) 1879-current, 1954-08-09
Corporation Stockholders Will
Share In Dividend Tax Change

(Ness: This 10 the fifth Of . series
Of articles explaining how The new
tax revision bill affects indi.
viAvAls.)
BY CHARLES p. BARRETT
WASHINGTON N-M0re than
seven million corporation stock
holders will share in the most con-
troyersial tax cut in all the 1000
pages of the new tax revision bill.
After talking about it for years,
Congress finally has restored a
special tax benefit on dividends.
II will reduce revenues an esti-
mated 2O4 million dollars the first
year, up to s6s millions in later
years.
Dividend income received spec
ial treatment under tax laws until
1885, when Democrats struck 1t
out in the heydey of the New
Deal" The new tax cut is a SYM
Dol of the return to power OF Re-
publican tax philosophy.
It is far less than recommended
by the Eisenhower administration,
but it is still substantial and 1t re-
establishes the principle.
The tax cut is two-edged:
First, you pay no taxes on the
first $50 of dividends received each
wear. You can automatically ex-
clude this $50 from your income
for tax purposes.
Second, you get a "tax credit
a further direct tax cut-of per
cent Of your remaining dividend
income.
The timing is important this
year. The $50 deduction applies to
dividends dated last Jan. / or
thereafter. The 4 per cent credit
applies only to dividends received
after last Saturday-July 81.
There is a limit to the amount
you can claim under the 4 per
cent dividend tax credit.
On your 1854 tax return, due next
April Is, you can't claim dividend
credit totaling more than 2 per
cent of your taxable" income,
which is your income after all de-
auctions and exefnptionS-the final
figure on which the tax rate is APP
piled.
In future years, you can't claim
a dividend tax credit of more than
4 per cent of your taxable income.
So if most or all your income
is from dividends, you probably
won't be able to get the full per
cent credit.
And you can't get any tax cut
on dividends received from mutual
savings banks or building and loan
associations, life insurance COM
panies, foreign corporations, nom
profit cooperatives, or mutual In
surance companies. These firms al
ready are either tax-free, or not
taxed as heavily as most corpora
tons.
If a husband and wife both have
dividend income, and they file a
joint return, they can deduct divi-
dends received by each Of them up
to $50, for a total deduction of 500.
But if the wife receives $S5 In
dividends and the husband $65,
they can deduct only $S5-the $50
maximum for the husband and the
$3S for the wife.
Here are examples Of how all
this adds up on tax returns:
Say you have = family of four
with $500 regular income and
1000 income from dividendS-a
total of $lO,5O0.
Both husband and wife have
more than $50 in dividends, so first
you subtract the 500 dividend ex-
clusion, leaving $1o.4O in income.
Then you subtract your $1,000
in personal exemptions and the
standard personal deduction of
$1,000, leaving taxable income of
$500.
Your regular tax rate would run
to q tax bill of $l.46O. But now
you take 4 per cent Of the $500
in dividends left after your exclu-
sion. This is $50, which is sub
tracted from $1,46O to leave q final |
tax payment of $1,424.
The dividend provision saved you !
$50 - $22 on your 500 exclusion, |
and $50 on your 4 per cent cent
credit.
The administration argues all |
this win encourage public invest
ment in stocks, and that this viii