In early 2003, the U.S. government cut the tax rate on dividends to a flat 15 percent instead of treating dividend payments as other income. All else being equal, how would we expect the number of companies paying dividends to change?

Question

Quizplus · Accepted Answer

Lowering the tax rate on dividends would make dividend payments more attractive to shareholders and potentially increase demand for stocks that pay them. This, in turn, could incentivize more companies to begin paying dividends in order to attract investors and remain competitive with other dividend-paying companies.

In Early 2003, the U