> Why don't the sellers of the shares owe tax? They do, but it is only paid by the people who took the money (instead of being forced to do so), and, more impo

> Why don't the sellers of the shares owe tax? They do, but it is only paid by the people who took the money (instead of being forced to do so), and, more importantly, only on the difference from what they paid. If you pay out $1mln of dividends, then everyone collectively owes (let's say at a qualified rate of 20%) a total of $200k. If you buy 20,000 shares from one guy at $50/share, you returned the same $1mln of cash to shareholders, but if he bought last year for $45, he only owes (let's say at a long-term capital gains rate of 20%) a total of $20k in taxes.