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The comic, however snarky and cute, manages only to obscure the point further. The (E) [in the comic] is different than other ones, because there's no exchange of goods nor services for the money between the company and its owner, the Shareholder.

Let me put it my way:

When a plumber puts his knowledge and tools to work, his revenue is taxed once, at personal level.

When a shareholder puts his knowledge and money to work (along with other shareholders, in form of a company), his revenue is taxed at both company level and again at private level.

Can you spot the double taxation now?

The corporation is a separate legal entity from it's owners, and thus is taxed separately. In step E the good being exchanged is money.

There are other "separate legal entities" like partnerships and S-corps that don't get double taxed. Only corporations have this double taxation. That's why it's unfair.

The philosophy here is that you shouldn't get taxed on dividends because you're an owner... the money was already yours. The plumber didn't have to pay tax again to take his money out of his plumbing business (maybe a limited-liability partnership) and buy DVDs, but the shareholder did.

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