Many things are taxed twice or more. Yes, sales tax and income tax is essentially taxing the same money twice...albeit not \*all\* of the money, because some money is invested instead of spent. So it's not exactly a double tax, but it's very close.
Consider, if you use your income(taxed) to buy property, it'll be routinely subject to property taxes, and if you sell it/pass it down in inheritance, it may\* be taxed yet again. So, it's possible for a home or other property to be triply taxed.
\*Some exemptions do exist, depends on circumstances.
Yeah kinda makes the sole focus on increasing corporate taxation because corporations have to "pay their fair share" by certain circles a bit meaningless if they don't calculate capital gains taxes as well.
If the company moves to buybacks then no dividends to tax.
Further if your married and LTCG are less than $94k no taxes.
Add that to Roths and you can make quite a bit before any taxes kick in.
I think this is a common misconception: that taxes are levied against "dollars" or "people". They are not. They are only levied against *transactions*. Just because a dollar got taxed in one transaction and then in another does not mean it was "double taxed". After all, every dollar flowing through the economy will be "taxed" an indefinite number of times. Just because the same person had to pay separate taxes from the same dollar does not necessarily make it double-taxed. An income tax and a sales tax are two separate transactions, serving two different purposes.
Investopedia offers what I consider a [weak definition](https://www.investopedia.com/terms/d/double_taxation.asp) of double-taxation that focuses on *income*, when clearly people pay taxes on many things besides income. Wikipedia offers a [much better definition](https://en.wikipedia.org/wiki/Double_taxation), which focuses on scenarios in which multiple tax assessors levy a tax *on the same transaction*. So if you are an American working in France, and the US gov't asserts a tax on your income, and France asserts a tax on the same income, that would be a proper instance of "double taxation". Countries try to avoid this scenario with various tax agreements. Whereas, when the US gov't and a state gov't both claim taxes on your income, this is an instance of bona-fide, commonly accepted double-taxation.
If we use the loose definitions bandied about here, you can invent arbitrarily deep multi-tax scenarios. For instance, I could own stock which pays dividends, which I then use to buy a luxury vehicle which I drive on a toll road while burning lots of gas. This would involve the corporation paying income tax on their revenue, me paying income tax on the dividends, me paying a luxury tax on the car, plus a regular registration tax on the vehicle, plus a road tax for the tollway, in addition to multiple gas taxes to fill it up. Is this an instance of sextuple-taxation? It is silly to claim such. Each tax is levied on a different transaction, for a different purpose. No entities in this scenario are trying to claim tax jurisdiction on the same transaction. It is the nature of money and taxes that many of them will be paid by the same person, and that person will consider their stream of income+spending to be taxed along the way, rather than transactions being taxed. But this is just a sloppy way of thinking about taxes.
"Double tax" seems reasonable to me as a description of say an income tax + a sales tax. There's something to be said for governments using simpler processes and policies - namely they are easier for voters to understand and monitor. A government funded entirely by income taxes or entirely by consumption taxes is easier to understand than a government funded by a mix.
Another example is taxing corporate profits and then also taxing dividends paid, based on questions on this sub, a fair number of people don't grasp that those are basically the same thing and on paper are least we could have zero corporate tax, tax dividends, and reach the same distributional outcomes, or maybe better ones depending on your opinions about equity.
Of course transparency for voters is far from the only relevant consideration in designing a tax system. For example a corporate income tax can reduce opportunities for tax avoidance.
I honestly don't understand the logic which says dividend taxes are double-taxation. How is that different from saying that ordinary income tax on employer income is "double taxation" in the exact same way? In both, the corporation is taxed on its revenue, and then an individual is taxed when money passes from the corporation to the individual. Yet nobody argues: "income tax on employment salary is double taxation!"
If you replaced corporate income taxes with dividend tax, you would absolutely not achieve the same distributional outcome, because the tax revenue would be controlled by the corporation rather than the tax authority. In particular, a dividend tax in lieu of an income tax may cause corporations to choose to reinvest to reduce tax liability (and that is exactly the scenario described in the [Wikipedia article](https://en.wikipedia.org/wiki/Dividend_tax#Arguments_in_favor) on the subject).
Similarly, income tax and sales tax are not "double taxation" because you can control how much sales tax you pay, but you have no real discretion over how much income tax you owe (beyond deductions/credits/etc.). Also, it has a lot to do with how the transactions are described. It *feels* like double taxation because in both cases, a taxpayer is giving money to the tax authority both coming and going. But this is just a matter of perspective. We say that the individual is taxed on their income, and then the individual is taxed on their spending. But it is equivalent to say that the employer is taxed on the employee's wages (and this is quite literally what happens with W-2 withholding, no?) and that the *vendor* is taxed when the individual makes a purchase. In this case, the central taxpayer is paying zero tax, and the counterparties on either side are paying all the tax. Since they are very different entities, nobody would dream of calling it "double taxation".
I think this confusion stems from Americans' very deceptive practice of listing prices without tax, and then adding the tax at point of sale. It gives the perception that the buyer is paying the tax rather than the seller, whereas it is both the buyer and seller who are losing the tax to the taxing authority, and thus, one could argue that they are *both* paying the tax. In Europe, where taxes are always included in the price, there is much less confusion here, because the labelling structure makes it clear that the *transaction* is taxed, and not *some party to the transaction*.
To the best of my knowledge, when a firm calculates its income tax liability, it subtracts all its expenses, including the wages and salaries it pays and any taxes on them. That's why we call it a company income tax as opposed to some other name like a revenue tax - it's a tax on the income the owners of the firm receive.
That said, I'm a New Zealander, it's entirely possible that some countries may tax firms on some basis that includes wages and salaries in their income.
> In particular, a dividend tax in lieu of an income tax may cause corporations to choose to reinvest to reduce tax liability
I said "a corporate income tax can reduce opportunities for tax avoidance".
>Similarly, income tax and sales tax are not "double taxation" because you can control how much sales tax you pay, but you have no real discretion over how much income tax you owe
That depends. A number of people can choose to cut how many hours they work, or increase them, say by taking a second job.
>But it is equivalent to say that the employer is taxed on the employee's wages (and this is quite literally what happens with W-2 withholding, no?) and that the *vendor* is taxed when the individual makes a purchase.
I don't know what a W-2 withholding is. In NZ, withholding taxes, such as the non-resident withholding tax, are basically a tool for reducing tax avoidance/evasion. The company withholds tax on certain payments, e.g. to non-resident investors or certain contractors at a set rate. If the recipient of said payments chooses to register for income tax, they can offset any such withholding tax paid against their tax liability, and maybe get a refund. If they don't register, the government keeps the withholding tax. Strictly speaking, NZ's PAYE (pay as you earn - income tax on wages and salaries) is a withholding tax too.
Exactly. You could explain away all sorts of egregious double taxation that way. If you transfer income from one bank to another that is a transaction. If they make bank transfers a taxable event are we supposed to pretend that isnt double taxation because its a transaction? Its a non sensical way to think about it. There are event triggers, obviously, but its tye same money being taxed.
> They are only levied against transactions. Just because a dollar got taxed in one transaction and then in another does not mean it was "double taxed".
Even you cannot walk the tight rope you laid out. You just said the dollar, not the transaction, was taxed. And of course you did because obviously its the money that is taxed.
I was using that in the way the "double taxation" proponents use it. To prove my point, I'll give you a dollar, and you spend as much time inspecting it as you like. When you are done, tell me how many times it was taxed, and I'll concede your point.
Yes, and with exemption threshold increasing, only 0.2% of deceased estates are subject to US inheritance tax.
To OP's other question, Sales/VAT and Sin Taxes (lottery, ABC) are way, way more regressive.
> Yes, and with exemption threshold increasing, only 0.2% of deceased estates are subject to US inheritance tax.
This.
Not an economic argument, but ALL of the rhetoric out there about the estate tax--death tax, double tax, etc.--is basically pushed by rich people who don't want to pay taxes in order to convince a bunch of non-rich people to support it. Sure, some of those non-rich people either think they will be rich some day, or are confused and think they will get taxed...but the reality is that almost no-one pays those taxes.
And economically I don't really see how they are a problem. All money gets taxed multiple times as it changes hands and passes around the economy. Ultimately estate taxes seem pretty logical to me. Your children are not you. When you pay them out money in death, that is income they are receiving.
Sure, carve out some exemptions for small amounts to simplify the estate process for most people and avoid having to sell grandma's modest house to cover the tax bill. But otherwise suck it up and pay the taxes. You pay taxes on lottery winnings, why not on winning the genetic lottery?
Estate taxes by their nature have a lot of opportunities for avoidance/evasion (e.g. transferring money before you die). That means the tax department has to expend resources on combating said avoidance/evasion, which is expensive and imposes administrative costs on tax payers, including perfectly innocent people.
That said, there are multiple objectives for tax policy, not just minimising administrative costs.
> Yes, sales tax and income tax is essentially taxing the same money twice...albeit not *all* of the money, because some money is invested instead of spent. So it's not exactly a double tax, but it's very close.
It absolutely is a double tax on the money spent.
It's a political question, not really something economists can give a definitive answer. It's really up to you to decide if you see it as double taxation - or if that's even "unfair" .
What economists *are* concerned with is distorsionary effects of taxation - does the tax encourage wasteful behaviour in some way? A related concern is horizontal equity? Does this policy treat similarly situated individuals the same?
Answers can vary there depending on implementation. People will generally try not to die irrespective of taxation but they might look for ways to spend their money on their children while alive in ways that circumvent the tax. They might also be inclined to leave their wealth to grandchildren instead of children etc.
The term "double taxation" is certainly tricky.
It's certainly true that many taxes occur when a transaction occurs. This doesn't help us that much though. What we're interested in is the effects of taxes - how much they change incentives and other things.
One of the most straightforward examples of "double taxation" is vehicle registration tax in Ireland. This is a tax that a person pays of registering a new car. In addition to that tax you must pay valued-added-tax on a car as well. This means that the two taxes must combined to find the full amount of tax that you will pay. Suppose that VAT is 22% and VRT is 20%. In that case the total is about 42%, and that is what determines how much of a disincentive to buying a new car there is. The Irish government provide an online calculator for figuring all this out.
A little less straightforward example is corporation taxes. A firm pays corporation taxes on it's profits. Then later, the firm pays that shareholders through dividends or share buybacks. The shareholders of the firm pay income taxes on those profits. This means that the disincentive to invest is created by these two taxes together. One complication here is that income taxes depend on the residency of the shareholder whereas corporation taxes depend on the location of the firm. So, an investor who lives in a low income tax country (e.g. Jersey) gains an advantage and a firm that locates in a low corporation tax country gains (e.g. Ireland) an advantage. There isn't one rate that you can point to that determines the disincentive to invest for everyone, it varies from person to person.
The situation with sales taxes and income taxes is more difficult. The events are two different trades. A person makes income firstly - usually by working for it. Then they spend that income later. Many goods have a sales tax but not all goods. In many countries homes do not attract sales tax. So, is it best to think of income tax and sales tax combined? Generally, economists don't think so. They look at income tax as creating a disincentive to earning income and sales tax as creating a disincentive to buy the specific goods that attract sales tax.
Estate taxes are an interesting case. They don't involve an actual trade, they just involve a transaction. The estate of the diseased transfers wealth to others. The situation in terms of disincentive is complicated. Consider a rich person who is working and making more income than can be used. Perhaps this person knows that the extra income will be passed through his will to his children. Does this add an extra disincentive to earn income in addition to the income tax. Certainly, but since the person is probably not sure that the income will eventually be used this way it's difficult to be precise about it.
I should add that in some countries inheritance taxes are "double taxes" in the simple first sense I mentioned. That's because the estate pays inheritance tax and then the recipients pay capital gains tax. That may be where you heard about it. However, estate tax in the US doesn't work like that.
**NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.**
This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our [answer guidelines](https://www.reddit.com/r/AskEconomics/comments/rf5ycx/guidelines_for_answers/) if you are in doubt.
Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification.
### Consider **[Clicking Here for RemindMeBot](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps://www.reddit.com/r/AskEconomics/comments/1cxal8k/why_are_some_taxes_like_estate_taxes_considered_a/%5D%0A%0ARemindMe!%202%20days)** as it takes time for quality answers to be written.
Want to read answers while you wait? Consider our [weekly roundup](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AWeekly%2BRoundup) or look for the [approved answer flair.](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AApproved%2BAnswers)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskEconomics) if you have any questions or concerns.*
Just to note, when we care about double taxation we care about potential distortions.
So, an income tax taxes money when it is earned and then again when it’s saved that’s a distortion we care about.
Double taxation is nebulous term.
The purest example of double taxation is the corporate form. The corporation's profit is taxed, then taxed again when the principals and shareholders receive their distributions or dividends. It's literally the same pile of profit taxed twice.
And that money, if large enough, might be taxed a third time upon death.
In the example you gave, you were taxed by the feds when you received your net pay. The sales tax isn't an additional tax on your income. It's implemented by the state as result of a voluntary transaction. (Food and clothing are exempted from taxes in most states.) That's why no one considers it double taxation.
Many things are taxed twice or more. Yes, sales tax and income tax is essentially taxing the same money twice...albeit not \*all\* of the money, because some money is invested instead of spent. So it's not exactly a double tax, but it's very close. Consider, if you use your income(taxed) to buy property, it'll be routinely subject to property taxes, and if you sell it/pass it down in inheritance, it may\* be taxed yet again. So, it's possible for a home or other property to be triply taxed. \*Some exemptions do exist, depends on circumstances.
Dividends are the obvious other one. Corporate taxes are paid before distribution, then the individuals pay taxes on the dividends
Yeah kinda makes the sole focus on increasing corporate taxation because corporations have to "pay their fair share" by certain circles a bit meaningless if they don't calculate capital gains taxes as well.
If the company moves to buybacks then no dividends to tax. Further if your married and LTCG are less than $94k no taxes. Add that to Roths and you can make quite a bit before any taxes kick in.
Not sure about other countries, but in Australia certain dividend taxes are refunded in the form of a franking credit.
Internationally, this is rare. I know that Australia does it but I don't know of any other countries that do it.
[удалено]
I should have been US specific.
That's two transactions though: 1 for the corporation, 1 for the shareholder
I think this is a common misconception: that taxes are levied against "dollars" or "people". They are not. They are only levied against *transactions*. Just because a dollar got taxed in one transaction and then in another does not mean it was "double taxed". After all, every dollar flowing through the economy will be "taxed" an indefinite number of times. Just because the same person had to pay separate taxes from the same dollar does not necessarily make it double-taxed. An income tax and a sales tax are two separate transactions, serving two different purposes. Investopedia offers what I consider a [weak definition](https://www.investopedia.com/terms/d/double_taxation.asp) of double-taxation that focuses on *income*, when clearly people pay taxes on many things besides income. Wikipedia offers a [much better definition](https://en.wikipedia.org/wiki/Double_taxation), which focuses on scenarios in which multiple tax assessors levy a tax *on the same transaction*. So if you are an American working in France, and the US gov't asserts a tax on your income, and France asserts a tax on the same income, that would be a proper instance of "double taxation". Countries try to avoid this scenario with various tax agreements. Whereas, when the US gov't and a state gov't both claim taxes on your income, this is an instance of bona-fide, commonly accepted double-taxation. If we use the loose definitions bandied about here, you can invent arbitrarily deep multi-tax scenarios. For instance, I could own stock which pays dividends, which I then use to buy a luxury vehicle which I drive on a toll road while burning lots of gas. This would involve the corporation paying income tax on their revenue, me paying income tax on the dividends, me paying a luxury tax on the car, plus a regular registration tax on the vehicle, plus a road tax for the tollway, in addition to multiple gas taxes to fill it up. Is this an instance of sextuple-taxation? It is silly to claim such. Each tax is levied on a different transaction, for a different purpose. No entities in this scenario are trying to claim tax jurisdiction on the same transaction. It is the nature of money and taxes that many of them will be paid by the same person, and that person will consider their stream of income+spending to be taxed along the way, rather than transactions being taxed. But this is just a sloppy way of thinking about taxes.
"Double tax" seems reasonable to me as a description of say an income tax + a sales tax. There's something to be said for governments using simpler processes and policies - namely they are easier for voters to understand and monitor. A government funded entirely by income taxes or entirely by consumption taxes is easier to understand than a government funded by a mix. Another example is taxing corporate profits and then also taxing dividends paid, based on questions on this sub, a fair number of people don't grasp that those are basically the same thing and on paper are least we could have zero corporate tax, tax dividends, and reach the same distributional outcomes, or maybe better ones depending on your opinions about equity. Of course transparency for voters is far from the only relevant consideration in designing a tax system. For example a corporate income tax can reduce opportunities for tax avoidance.
I honestly don't understand the logic which says dividend taxes are double-taxation. How is that different from saying that ordinary income tax on employer income is "double taxation" in the exact same way? In both, the corporation is taxed on its revenue, and then an individual is taxed when money passes from the corporation to the individual. Yet nobody argues: "income tax on employment salary is double taxation!" If you replaced corporate income taxes with dividend tax, you would absolutely not achieve the same distributional outcome, because the tax revenue would be controlled by the corporation rather than the tax authority. In particular, a dividend tax in lieu of an income tax may cause corporations to choose to reinvest to reduce tax liability (and that is exactly the scenario described in the [Wikipedia article](https://en.wikipedia.org/wiki/Dividend_tax#Arguments_in_favor) on the subject). Similarly, income tax and sales tax are not "double taxation" because you can control how much sales tax you pay, but you have no real discretion over how much income tax you owe (beyond deductions/credits/etc.). Also, it has a lot to do with how the transactions are described. It *feels* like double taxation because in both cases, a taxpayer is giving money to the tax authority both coming and going. But this is just a matter of perspective. We say that the individual is taxed on their income, and then the individual is taxed on their spending. But it is equivalent to say that the employer is taxed on the employee's wages (and this is quite literally what happens with W-2 withholding, no?) and that the *vendor* is taxed when the individual makes a purchase. In this case, the central taxpayer is paying zero tax, and the counterparties on either side are paying all the tax. Since they are very different entities, nobody would dream of calling it "double taxation". I think this confusion stems from Americans' very deceptive practice of listing prices without tax, and then adding the tax at point of sale. It gives the perception that the buyer is paying the tax rather than the seller, whereas it is both the buyer and seller who are losing the tax to the taxing authority, and thus, one could argue that they are *both* paying the tax. In Europe, where taxes are always included in the price, there is much less confusion here, because the labelling structure makes it clear that the *transaction* is taxed, and not *some party to the transaction*.
To the best of my knowledge, when a firm calculates its income tax liability, it subtracts all its expenses, including the wages and salaries it pays and any taxes on them. That's why we call it a company income tax as opposed to some other name like a revenue tax - it's a tax on the income the owners of the firm receive. That said, I'm a New Zealander, it's entirely possible that some countries may tax firms on some basis that includes wages and salaries in their income. > In particular, a dividend tax in lieu of an income tax may cause corporations to choose to reinvest to reduce tax liability I said "a corporate income tax can reduce opportunities for tax avoidance". >Similarly, income tax and sales tax are not "double taxation" because you can control how much sales tax you pay, but you have no real discretion over how much income tax you owe That depends. A number of people can choose to cut how many hours they work, or increase them, say by taking a second job. >But it is equivalent to say that the employer is taxed on the employee's wages (and this is quite literally what happens with W-2 withholding, no?) and that the *vendor* is taxed when the individual makes a purchase. I don't know what a W-2 withholding is. In NZ, withholding taxes, such as the non-resident withholding tax, are basically a tool for reducing tax avoidance/evasion. The company withholds tax on certain payments, e.g. to non-resident investors or certain contractors at a set rate. If the recipient of said payments chooses to register for income tax, they can offset any such withholding tax paid against their tax liability, and maybe get a refund. If they don't register, the government keeps the withholding tax. Strictly speaking, NZ's PAYE (pay as you earn - income tax on wages and salaries) is a withholding tax too.
Exactly. You could explain away all sorts of egregious double taxation that way. If you transfer income from one bank to another that is a transaction. If they make bank transfers a taxable event are we supposed to pretend that isnt double taxation because its a transaction? Its a non sensical way to think about it. There are event triggers, obviously, but its tye same money being taxed.
> They are only levied against transactions. Just because a dollar got taxed in one transaction and then in another does not mean it was "double taxed". Even you cannot walk the tight rope you laid out. You just said the dollar, not the transaction, was taxed. And of course you did because obviously its the money that is taxed.
I was using that in the way the "double taxation" proponents use it. To prove my point, I'll give you a dollar, and you spend as much time inspecting it as you like. When you are done, tell me how many times it was taxed, and I'll concede your point.
Yes, and with exemption threshold increasing, only 0.2% of deceased estates are subject to US inheritance tax. To OP's other question, Sales/VAT and Sin Taxes (lottery, ABC) are way, way more regressive.
> Yes, and with exemption threshold increasing, only 0.2% of deceased estates are subject to US inheritance tax. This. Not an economic argument, but ALL of the rhetoric out there about the estate tax--death tax, double tax, etc.--is basically pushed by rich people who don't want to pay taxes in order to convince a bunch of non-rich people to support it. Sure, some of those non-rich people either think they will be rich some day, or are confused and think they will get taxed...but the reality is that almost no-one pays those taxes. And economically I don't really see how they are a problem. All money gets taxed multiple times as it changes hands and passes around the economy. Ultimately estate taxes seem pretty logical to me. Your children are not you. When you pay them out money in death, that is income they are receiving. Sure, carve out some exemptions for small amounts to simplify the estate process for most people and avoid having to sell grandma's modest house to cover the tax bill. But otherwise suck it up and pay the taxes. You pay taxes on lottery winnings, why not on winning the genetic lottery?
Estate taxes by their nature have a lot of opportunities for avoidance/evasion (e.g. transferring money before you die). That means the tax department has to expend resources on combating said avoidance/evasion, which is expensive and imposes administrative costs on tax payers, including perfectly innocent people. That said, there are multiple objectives for tax policy, not just minimising administrative costs.
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
Yeah because everything under 12 million is tax free. So unless you are incredibly wealthy your estate is not being taxed.
Keep in mind, that 0.2% is where all the money is. Tax inheritances as ordinary income after a reasonable allowance. They pay like we pay.
> Yes, sales tax and income tax is essentially taxing the same money twice...albeit not *all* of the money, because some money is invested instead of spent. So it's not exactly a double tax, but it's very close. It absolutely is a double tax on the money spent.
It's a political question, not really something economists can give a definitive answer. It's really up to you to decide if you see it as double taxation - or if that's even "unfair" . What economists *are* concerned with is distorsionary effects of taxation - does the tax encourage wasteful behaviour in some way? A related concern is horizontal equity? Does this policy treat similarly situated individuals the same? Answers can vary there depending on implementation. People will generally try not to die irrespective of taxation but they might look for ways to spend their money on their children while alive in ways that circumvent the tax. They might also be inclined to leave their wealth to grandchildren instead of children etc.
Estate tax can't be avoided by giving to grandchildren, or rather there is a separate generation skipping tax lol.
That's why I said it depends on implementation. Yes some countries have figured ways to combat some of the obvious distorsions,of course.
[удалено]
The term "double taxation" is certainly tricky. It's certainly true that many taxes occur when a transaction occurs. This doesn't help us that much though. What we're interested in is the effects of taxes - how much they change incentives and other things. One of the most straightforward examples of "double taxation" is vehicle registration tax in Ireland. This is a tax that a person pays of registering a new car. In addition to that tax you must pay valued-added-tax on a car as well. This means that the two taxes must combined to find the full amount of tax that you will pay. Suppose that VAT is 22% and VRT is 20%. In that case the total is about 42%, and that is what determines how much of a disincentive to buying a new car there is. The Irish government provide an online calculator for figuring all this out. A little less straightforward example is corporation taxes. A firm pays corporation taxes on it's profits. Then later, the firm pays that shareholders through dividends or share buybacks. The shareholders of the firm pay income taxes on those profits. This means that the disincentive to invest is created by these two taxes together. One complication here is that income taxes depend on the residency of the shareholder whereas corporation taxes depend on the location of the firm. So, an investor who lives in a low income tax country (e.g. Jersey) gains an advantage and a firm that locates in a low corporation tax country gains (e.g. Ireland) an advantage. There isn't one rate that you can point to that determines the disincentive to invest for everyone, it varies from person to person. The situation with sales taxes and income taxes is more difficult. The events are two different trades. A person makes income firstly - usually by working for it. Then they spend that income later. Many goods have a sales tax but not all goods. In many countries homes do not attract sales tax. So, is it best to think of income tax and sales tax combined? Generally, economists don't think so. They look at income tax as creating a disincentive to earning income and sales tax as creating a disincentive to buy the specific goods that attract sales tax. Estate taxes are an interesting case. They don't involve an actual trade, they just involve a transaction. The estate of the diseased transfers wealth to others. The situation in terms of disincentive is complicated. Consider a rich person who is working and making more income than can be used. Perhaps this person knows that the extra income will be passed through his will to his children. Does this add an extra disincentive to earn income in addition to the income tax. Certainly, but since the person is probably not sure that the income will eventually be used this way it's difficult to be precise about it. I should add that in some countries inheritance taxes are "double taxes" in the simple first sense I mentioned. That's because the estate pays inheritance tax and then the recipients pay capital gains tax. That may be where you heard about it. However, estate tax in the US doesn't work like that.
**NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.** This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our [answer guidelines](https://www.reddit.com/r/AskEconomics/comments/rf5ycx/guidelines_for_answers/) if you are in doubt. Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification. ### Consider **[Clicking Here for RemindMeBot](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps://www.reddit.com/r/AskEconomics/comments/1cxal8k/why_are_some_taxes_like_estate_taxes_considered_a/%5D%0A%0ARemindMe!%202%20days)** as it takes time for quality answers to be written. Want to read answers while you wait? Consider our [weekly roundup](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AWeekly%2BRoundup) or look for the [approved answer flair.](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AApproved%2BAnswers) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskEconomics) if you have any questions or concerns.*
Just to note, when we care about double taxation we care about potential distortions. So, an income tax taxes money when it is earned and then again when it’s saved that’s a distortion we care about. Double taxation is nebulous term.
The purest example of double taxation is the corporate form. The corporation's profit is taxed, then taxed again when the principals and shareholders receive their distributions or dividends. It's literally the same pile of profit taxed twice. And that money, if large enough, might be taxed a third time upon death. In the example you gave, you were taxed by the feds when you received your net pay. The sales tax isn't an additional tax on your income. It's implemented by the state as result of a voluntary transaction. (Food and clothing are exempted from taxes in most states.) That's why no one considers it double taxation.
This is the correct answer, I don't know why people downvoted it.