BOSTON ( TheStreet) -- If the tax rate on dividends spikes at the end of the year, millions of investors will share in the pain.Dividends are taxed at 15%, and the Obama administration has signaled -- most recently by Treasury Secretary Timothy Geithner to CNBC's Larry Kudlow -- that it supports a relatively modest increase, to no more than 20% at the top rate. But inaction by Congress would mean that, in 2011, qualified dividends will no longer be taxed like capital gains, but instead treated as ordinary income at a rate that would top out at 39.6%. Among those leading the charge against that scenario are utility companies, many of which offer the fattest yields. In 2009, companies such as PG&E ( PCG), Duke Energy ( DUK) and Exelon ( EXC) paid out $18.5 billion in dividends.
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