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> It's already been mentioned that some of the money has been taxed once already, when the corporation pays taxes on profits before they're paid out as dividend
by drewrv 5y ago
> It's already been mentioned that some of the money has been taxed once already, when the corporation pays taxes on profits before they're paid out as dividends.
I never understood "double taxation" arguments. Currency circulates, of course a given dollar will get taxed more than once as it moves around the economy.
- cperciva 5y agoThe issue here isn't "double taxation" so much as "equitable taxation". There's a theory that economically equivalent situations should face equal tax burdens; if you compare the situations of "person is a sole proprietor" vs "person creates a corporation which earns profits and pays them out as dividends" you conclude E = C + (1-C) D, where E is the tax rate on earned income, C is the corporate tax rate, and D is the dividend tax rate. In Canada, we don't have a separate "dividend tax rate" but instead taxpayers who receive dividends get a credit for the amount of taxes the corporation paid "on their behalf".