Is there a better way to eliminate double taxation?
If taxing income more than once hinders economic growth, the obvious answer is to eliminate double taxation. But there are three ways to achieve this goal. The President’s approach–eliminating the second layer of tax at the individual level–is the preferred method, but the other approaches are theoretically similar and would generate the same economic benefits. The individual side This is the approach sought by the Bush Administration. Dividend income would be subject to the corporate income tax, but individual taxpayers would no longer have to pay a second layer of tax on this income. Excluding all dividends from the personal income tax is the simplest way to achieve this goal. The President’s proposal largely utilizes this method but, regrettably, is not quite this straightforward because of concerns that existing tax credits might allow some dividend income to escape tax at the corporate level. The corporate side Allowing companies to deduct dividend payments is another way to end
