The dividend tax is the tax on corporate dividends.

United States

President George W. Bush proposed in 2003 to eliminate the U.S. dividend tax. The main argument for its elimination was that it amounts to a "double taxation"—once as corporate profits and secondly as personal income ([1]).

"Double taxation is bad for our economy. Double taxation is wrong. Double taxation falls especially hard on retired people. About half of all dividend income goes to America's seniors, and they often rely on those checks for a steady source of income in their retirement.

It's fair to tax a company's profits. It's not fair to double-tax by taxing the shareholder on the same profits. So today, for the good of our senior citizens, and to support capital formation across the land, I'm asking the United States Congress to abolish the double taxation of dividends." ([2]).

Critics argued that eliminating it would have little effect for the bottom 60% of wage-earners, and greatly reduce taxes for the upper 20%; in general, the middle and upper class have money left over to place in long term investments, including stocks. [3]

Supporters pointed out that the bottom 60% of wage-earners already pay little in taxes but are probably harmed the most by the double taxation. When corporations decide how to raise their capital, they see that the interest payments on debt are taxed only once while the dividend payments on equity are taxed twice, thus the tax system favors going into debt and becoming highly leveraged. Highly leveraged companies must layoff or furloough more workers more quickly at the first signs of an economic downturn. The double tax on dividends thus increases the depth of recessions in the business cycle. It is the bottom 60% of wage earners that suffer more than the "rich" from layoffs and deeper recessions. Given the negative impact of leverage on the business cycle, from a macro-economic perspective, it would be wiser to double tax interest rather than dividends by reducing the deductability of interest.

After months of wrangling, the U.S. Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) that included some of the cuts President Bush requested. He signed the bill on May 28, 2003. Under the JGTRRA, dividends are taxed at a 15% rate for most individual taxpayers. Dividends received by low income individuals are taxed at a 5% rate until December 31, 2007, and are untaxed in 2008. On January 1, 2009, standard income tax rates will again apply to dividend income for all individuals.

Finland

In Finland, a double taxation will be in use of 2005. Income tax is 29% for a stockowner and the total tax will be around 50%.

Netherlands

In the Netherlands there is a tax of 1.2 % per year on the value of the share, regardless of the dividend, as part of the flat tax on savings and investments.

Romania

In Romania there is a tax of 5% on the dividends with no double taxation.

Australia

Double taxation of corporate dividends ceased to exist in Australia on 1986 after the introduction of "Dividend Imputation."