How Much Will Dividend Tax Hike Lower Stock Values?
Luskin is right when he argues that this tax increase, if it isn't repealed before it is implemented, will lower stock prices. However, the effect will be a lot smaller than Luskin thinks for two reasons.
First, because some stock owners will see their after tax return reduced less ( if their total income is less than $200,000 per year) or not at all (if they're foreigners).
And secondly because the value of stocks isn't primarily based on dividends during the coming year, or even the coming few years, but on the present value of all dividends in all eternity, or at least for as long as the company will exist. If investors hope that the dividend tax will be reduced again in the future then the forecasted loss of value will be lower.