Four Facts About Dividend Payouts and the 2003 Tax Cut

23 Pages Posted: 19 Jul 2012

Date Written: July 18, 2012


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.

Keywords: Taxes, payout policy, dividends, share repurchases

JEL Classification: H24, G35

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:

Jesse Edgerton (Contact Author)

JP Morgan ( email )

270 Park Avenue
New York, NY 10027
United States

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