Double Taxation

Double taxation occurs when a government taxes the same income more than once. Unfortunately there are many forms of double taxation written into the U.S. tax code. Many citizens are not even aware that they are the victim of double taxation. For instance, income tax is applied to a worker's full earnings, and then the same earnings are taxed again for social security -- a clear form of double taxation. If you have ever purchased tires for your car an excise tax is added to your bill and then sales tax is computed on top of that -- another clear instance of double taxation. In some situations multi-national corporate income may be subject to double taxation by two or more governments. For investors, double taxation occurs when a company's profits are taxed and the same profits are taxed again as dividends.