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

Lower tax rates on dividends make them more attractive to investors, which in turn makes them more attractive to companies as a way of rewarding shareholders. Therefore, we would expect more companies to start paying dividends or increase existing dividend payments.

In Early 2003, the U