Double Taxation is paying tax twice, at the time when you pay taxes and then if you own stocks and the company pays dividends, you get taxed again. The Bush Administration is trying to stop that, right now only 50% of when the company pays you dividends is taxed under Bush and it will be 0% in the future Thank You mzkhadir

Double-taxation is the effect of two layers of tax on the same earnings. When a corporation earns income, the corporation pays income tax on the earnings. Then, if a corporation pays a dividend, the shareholder is taxed at (currently) 15% on the dividend income. Thus, for example, on corporate earnings of $100 at the highest corporate tax bracket of 35%, the corporation pays $35 of tax, leaving $65. If that $65 is distributed as a dividend, then the shareholder pays an additional $10 tax (15% of $65), leaving net-tax income of only $55 of the original $100. This means that there is an effective 45% tax rate on the $100 of corporate earnings. One way to avoid double-taxation is to avoid the corporate form of doing business. Double-taxation is an aspect of doing business as a corporation. Other business entities (e.g. sole proprietorships, partnerships, LLCs if they choose to be taxed like partnerships) do not incur any income tax themselves -- their owners pay the income taxes directly. Another way to avoid double-taxation (useful for smaller, employee-owned corporations) is to distribute the corporate earnings in a way that provides a deduction for the corporation. If the corporation pays a salary of $100, then it can take a deduction of $100 from its gross income (and thus saving the $35 tax on $100 of its gross income). The $100 is then included in the employee's income & taxed at the employee's marginal rate. Obviously the government is wise to exploiting the system by inflating salaries, "hiring" your family and friends to do fake jobs, and other types of abuse to avoid the corporate level of tax.