Because dividends are taxed at the same rate as capital gains under the 2003 Tax Act, a firm's strategy of paying low or no dividends primarily offers tax advantages to wealthy stockholders through tax deferral.

Question

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The 2003 Tax Act equalized the tax rate for dividends and capital gains, so a low or no dividend strategy primarily benefits wealthy stockholders through tax deferral.

Because Dividends Are Taxed at the Same Rate as Capital