Whats Wrong With Taxing Both Corporations and Shareholders?
The argument I just made shows why the corporate income tax and individual income tax (including the dividend tax) do not really draw from the same tax base. But what if they did? It’s not necessarily a bad thing. While it’s a nuisance that two sets of paperwork have to be done, having two entities each separately accountable may, in the end, reduce tax cheating: The individual takes a greater risk in lying about the dividend he got, because the corporation has a record; the corporation is also likely to be more careful in disclosing the income it’s paid out in dividends, because individual shareholders’ returns will disclose the amount. Attempts to evade both taxes will inevitably be more difficult to pull off. In the end, though, these are fine points. Overwhelmingly, the most important point is that quibbles about “double taxation” are meaningless. What matters is the total tax that individuals and corporations must pay. (And although the focus of this article is on taxation, it als