If you follow the stock market, you'll notice that big public companies are paying out all sorts of special dividends early to avoid a dreaded tax hike on such earnings. If the Bush tax cuts lapse, the top dividend tax rate will rise from 15 percent today to 39.6 percent on January 1. Or, if President Obama gets his way, dividend tax rates will go up only for the top 2 percent of earners, while remaining unchanged for everyone else.
In other words, dividends may once more be taxed as regular income -- and that's how it should be.