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You can arguably make a case that taxing dividends represents "double taxation" in that the corporation turns a profit, pays corporate income taxes on the profit, pays a portion of the after tax profit to the stockholders as dividends, and the stockholders pay individual income taxes (again) on their share of the profit.
I know that there is all kinds of legal (and shady) sleight of hand whereby many corporations can avoid the payment of some or all corporate income tax liability.
My proposal would be to tax individuals receiving corporate dividends on a sliding scale. If the corporation paid zero taxes, they are taxed at the maximum corporate tax rate. If the corporation paid the full corporate tax rate, the tax on the dividends is zero. The tax on dividends would be paid on a sliding scale from zero to the maximum corporate tax rate based on the effective tax paid by the corporation paying out the dividend.
It might be a bit complicated, but the 1099 should tell the IRS and the dividend recipient to what tax rate the dividend will be subject.
On the surface, some dividend recipients will get "free money" but essentially, it will be a qway of getting back the money that escapes corporate income tax through loopholes.
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