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Four Facts About Dividend Payouts and the 2003 Tax Cut

Jesse Edgerton

Goldman Sachs

July 18, 2012

International Tax and Public Finance, Forthcoming

Recent literature has claimed that the 2003 U.S. dividend tax cut caused a large increase in aggregate dividend payouts. I document four simple facts that call this claim into question. First, the post-tax cut increase in dividend payouts coincided with a surge in corporate profits, such that the dividend payout ratio did not rise. Second, share repurchases increased even more rapidly than dividend payouts. Third, dividend payouts by Real Estate Investment Trusts also rose sharply, even though they did not qualify for reduced taxation. Finally, the stock market was forecasting an increase in dividend initiations by mid-2002, before the tax cut had been proposed.

Number of Pages in PDF File: 23

Keywords: Taxes, payout policy, dividends, share repurchases

JEL Classification: H24, G35

Accepted Paper Series

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Date posted: July 19, 2012  

Suggested Citation

Edgerton, Jesse, Four Facts About Dividend Payouts and the 2003 Tax Cut (July 18, 2012). International Tax and Public Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2112076

Contact Information

Jesse Edgerton (Contact Author)
Goldman Sachs ( email )
200 West St.
New York, NY 10282
United States
Feedback to SSRN

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