Dividend Tax Expires, Stock Unaffected?

A recent opinion article in CFO argues that allowing the Bush dividend tax cut to expire will not affect stock prices. In other words, the author argues that tax rates on dividends do not affect stock prices for four reasons: 1) Dividends are critical to returns and smart investors do not turn their backs on dividends. 2) Dividend paying stocks remain in high demand, the widows and orphans argument. 3) Institutional investors will not be impacted, a rephrasing of the widows and orphans argument. 4) There is no evidence that companies adjust dividends based on shareholder taxation, an argument that Figures 16.7 and 16.8 would seem to contradict.