Proposed Dividend Tax Hike Adds to Obama's Woes With Seniors

(By allowing Bush-era policies to expire, President Obama would, in effect, raise taxes on the dividend payments that millions of seniors depend on for their livelihood.)

The proposed dividend tax hike is dramatic, raising the tax from 15 percent to as high as 39.6 percent. Many seniors who use dividends to supplement Social Security would suffer significant losses if the hike takes effect Jan. 1, 2011.

Among all age groups, seniors would be hit hardest. Taxpayers 55 and older account for 71 percent of all dividend income earned; those over age 65 earn 48 percent of dividend income, according to the Tax Center. Seniors are nearly twice as likely as any other age group to report dividend income on tax returns.

The conservative Heritage Foundation estimates the dividend tax increase could wreak havoc on the economy, causing stock prices to drop by more than $211 billion. Raising taxes on dividends would reduce the value of all corporate stocks traded in the U.S. market, damaging seniors' retirement portfolios.

Of course, seniors represent a powerful voting bloc, with voters age 60 and up representing 29 percent of the electorate during the 2006 midterm elections, according to CNN exit polling. In the key tossup state of Nevada, for example, voters 60 and older made up 28 percent of the electorate that year. In Florida, those 60 and above represented 34 percent of voters.