Agreed. The double taxation argument is also flawed for a number of other reasons. Following is an excerpt from an article by Dean Baker:
The trick in this argument is that it ignores the enormous benefits that the government is granting by allowing a corporation to exist as a free standing legal entity. The most important of these advantages is limited liability. If a corporation produces dangerous products or emits dangerous substances that result in thousands of deaths, shareholders in the corporation cannot be held personally responsible for the damage. The corporation can go bankrupt, but beyond that point, all the shareholders are off the hook, the victims of the damage are just out of luck.
In addition, it should be noted that most companies pay far less than the 35%. According to a New York Times article, U.S. corporations paid an average effective tax rate of 27.1% in 2008. Also, a number of sources suggest that the burden of corporate taxes do not fall fully on shareholders. Following are excerpts from several sources:
In this article, we argue that neither of the agencies' assumptions--that capital bears 100 percent or that no one bears the tax--is valid. Both approaches fail to reflect recent empirical and theoretic research that finds workers bear a large portion of the burden of the CIT. In particular, the empirical studies suggest that distribution tables that allocate 50 percent or more of the burden to labor may be closer to the truth.
Source: American Enterprise Institute
The distribution of the corporate income tax is so uncertain that it is left out of most burden tables but is thought to be borne mainly by either shareholders (at least in the short run) or workers (in the long run, as capital adapts). These taxes are described as if workers, savers, and investors offered their labor and capital in totally inelastic supply, undiminished in quantity, when the tax cuts their compensation. It is assumed that they make no demand for an increase in compensation in response to the tax, so they swallow the entire burden of the income and other factor taxes that they pay.
Source: The Heritage Foundation
Corporations are responsible for remitting corporate taxes to the state, but the actual burden of the state corporate tax falls elsewhere - on shareholders, consumers, workers, or some combination of the three. ... The most recent economic research suggests that labor bears the majority of the corporate tax burden at the national level. In response to higher state corporate tax rates, corporations may lower wages, thereby passing the burden onto workers.
Love it.
When the Big Boss gets hit with more taxes the employees are not going to get a raise ~ and there goes the overtime ~ and maybe even a cut in the "bonus", or, heaven forfend, a cut in the "base pay" or "standard rate".
Everybody who has ever worked for a reasonably open company knows what happens when taxes go up, or cost of materials or supplies increases, or electricity, rent or TAXES climb. Management will go out of its way to tell you all about it because they use inflation as a reason to cut your piece of the action.
Actually, management itself can find its piece cut. And, maybe there'll be NO DIVIDENDS THIS YEAR, and that always leaves the blue hairs kvetching ~ but the bondholders continue to get theirs no matter what (unless it's a really serious worldwide economic slump).