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Looming Dividend Tax Hike

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    PSEG CFO Caroline Dorsa fears the dividend tax hike will hurt business.

  • Duration 3:53
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This transcript is automatically generated

Spot they're thinking.

Well here's what's rolling in Washington anyway in just 75 days we're gonna hit the fiscal -- and among the very real threats to investors.

A tax hike on dividends starting January 1 the top dividend tax rate.

Could jump from 50% over 43%.

New Jersey energy company the Public Service Enterprise Group has paid out in dividend.

405.

Years company appears now the tax hike is gonna rob them.

Of investors joining me now PSE GC FO.

-- -- like -- -- great to have you back thank you very much we've we've talked about this before we're still dealing with this issue what is the company got to do.

If this tax goes through would you scale back your dividend would you do buyback instead -- so.

Thanks for the chance to be on -- and chat about -- -- little -- we're spending a lot of time helping folks understand.

In Washington and helping our investors understand how important this issue is.

To all of us as you said the rate going up from 15% now to as high as 43% depending on hearing com.

It's a real hit for our investors many of whom are individuals retirees.

On former employees of the company many newcomers -- in New Jersey.

I'm New Jersey residents usually retired 65 plus I mean that's 40%.

At your shareholders -- I don't and the they're depending on that dividend income at this it's absolutely part of how they think about their retirement income absolutely but -- the rich.

No they're not always not it's yeah that they put some velocity -- but go ahead there.

Not always -- it's obviously we and the other utilities have a payout ratio that ranges from fifty to 60% or more.

-- -- kept many individual.

Investors across the industry and there at all spectrums of the incomes levels I'm sure.

Caroline -- -- thousand employees you've got a market cap eleven billion dollars in revenues last year Matt amassed a market cap.

You've got to have some allies in Washington right now there -- linked to hear your concerns which many American companies share the same concern.

They do share the same concerns -- and we do have a lot of people willing to listen.

And the two points that I think are most important to keep in mind one is the rate as you pointed out and the potential increase and the impact.

Not to our bottom line right because we're not talking about our income -- talking about what happens to individuals when they receive the dividend from us and that second tax that gets applied.

But the second thing is if you look at what is potentially to happen and if the fiscal cliff occurs.

It's a differential rate between dividends and capital gains right now both are taxed at 15%.

If things don't change in Washington by the end of the year capital gains will go to about 23%.

And -- dividend to as high as 43%.

So they've got a differential impact in terms of government potentially signaling.

Change different winners and losers depending on -- your earnings are given out as dividends or whether they are realized by your channel -- -- pay out dividends more than four person.

-- -- an -- in the -- a hundred and plus you're you've been paying out a dividend your stock is up about 6%.

Over the last six months are you and the CEO concerned about stock performance if you have people like vanguard.

If you people like I share swap music ATF that look for your type of investments in their funds if they pull out of your stock how.

I mean you've got to be concerned about.

We are concerned about it because if you look at it from an investor perspective they would say -- I have a differential tax rate.

From a dividend paying stock to a stock that has its return through capital gains and my net is different for one dollar of earned -- by the company.

I'll have a different kind of return because because of the tax system.

We think parity is absolutely important so that there's a level playing field.

That the winners and losers are based on what we do in the marketplace not based on the tax -- -- -- -- the CFO PS EU -- -- obviously be watching this obviously for the rest of the -- talent thank you very much for the update thanks very.

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