Most other countries either tax the profit at the corporate level and then dividends are tax free, or dividends are distributed tax free at the corporate level and then taxed at the usual individual income tax rates.

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Either all of the profits of the corporation pay the corporate income tax and then dividends are tax free to the recipients or dividends are tax deductible to the corporation and the recipient pays the usual income taxes.

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Savvier investors move their money into and out of funds, to take advantage of the tax-free dividends.

ECONOMIST: Paying dividends