Double taxation of dividends?

• Author: McNairn, William
• Position: Speak Out

In exposing the falsity of the claim of "double taxation of dividends," one may note that such a claim is on its face literally unsupportable since there is absolutely no evidence in the federal tax codes that dividends are taxed twice to the same taxpayer.

And, if these codes do not provide for double taxation of dividends, the claim must evaporate as a stated reality and have no plausible life except, possibly as a semantic mirage from the world of economic theory.

The vague view, often advanced as support for the double tax claim, is that because a corporation pays income taxes on its net profits and later a shareholder of that corporation pays income taxes on any dividends received from those profits, a kind of double taxation exists. But this view fades into nullity when one examines the numerous facts that expose its lack of substance. To name a few:

1. The corporation and any one shareholder are established in law as different taxable entities, subject to different tax rates and regulations, having different kinds of revenue and costs and serving entirely different operational functions;

2. Many corporations never declare dividends, so for these corporations there are no dividends to be taxed twice;

3. Through the judicious use of offshore tax sites and special corporate allowances many corporations pay no income taxes at all on their earnings (60 percent according to a recent Wall Street Journal report) and hence...