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    Double Taxation of Corporations

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    Is double taxation of corporations is a good thing why or why not? Who ultimately pays that tax? What unintended consequences might it have on a corporation?

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    The concept of double taxation refers to the fact that corporations pay tax on their earnings and then after they distribute after tax earnings in the form of dividends, the shareholders (recipients of those dividends) pay tax on the dividends they receive.

    Whether or not double taxation is good or bad arguable. It depends on your position. For example, corporations pay tax on their income just like any other entity does. Furthermore, individuals pay income tax on the income they earn. Individuals earning a salary from a corporation pay tax on that salary and individuals who earn their income solely from investing and receiving dividends pay tax on that income. It would seem unjust to tax salaries only and not other forms of income. This would ...

    Solution Summary

    The expert examines double taxation of corporations. Who ultimately pays the tax is determined.