Wall Street Journal, Higher Taxes May Not Push Firms To Cut Dividends, by Martin Vaughan:

The expiration of a tax cut on dividend income wouldn't likely spur firms to significantly cut their dividend payouts, say some scholars who study the relationship between tax rates and corporate behavior. One big reason is that a growing share of U.S. equities are held by retirement funds and foreign investors that aren't swayed by U.S. individual income-tax rates. "If there is an effect, it will be modest," University of North Carolina professor Douglas Shackelford said of the pending higher tax rates. "Pension funds, 401(k)'s, foreigners and corporations–all of these don't care" about the individual tax rate, he said. …

Critics of the 2003 law that slashed the dividend rate to 15% say it played a small role or none at all in corporate decisions to return cash to shareholders. While it is clear that corporate dividend payments increased over the five-year period following the law's enactment, these critics argue the increase merely tracked share value growth in an expanding economy.

"My view is that the tax cut didn't achieve much in terms of encouraging distributions," said Reuven Avi-Yonah, a professor at the University of Michigan law school. Avi-Yonah cites recent data on corporate distributions showing that in the period from 2003-2008, companies heavily favored stock buybacks over dividends as a way to return money to shareholders. That suggests that the views of foreign hedge fund shareholders, which prefer stock buybacks, held greater sway over corporate boards than the tax cut, Avi-Yonah contends.

In a June paper [Dividends, Share Repurchases, and Tax Clienteles: Evidence from the 2003 Reductions in Shareholder Taxes], Shackelford and colleagues Jennifer Blouin and Jana Raedy found that the tax cut did spur some firms to increase dividend payouts. This effect was greatest at firms in which corporate directors and officers held large stakes, raising the question of whether those who acted to increase dividends were motivated by their own potential for gain. That said, Shackelford said the response to the 2003 tax cut "was not nearly as great as had been anticipated before the legislation passed." He said another reason higher tax rates next year won't mean lower dividends is that firms are sensitive to how investors would interpret such a move. "If you cut dividends, the market really pounds you," Shackelford said.