Yes it is. A stock buyback increases shareholders' wealth with a tax of 0% on the shareholders.

The tax code makes a bright line out of the distinction between income and capital that is, economically speaking, quite fuzzy. Depending on your need for liquidity and your means of acquiring it, it might not be really there.

The investor pays tax when the stock is sold. That tax implication is exactly the reason that many investors prefer buybacks over dividends.

In order to realize this tax free wealth gain, the shareholders would have to sell the stocks and pay taxes, right? It sounds like then the most important factor is not the double taxation, but that you get to choose when the "second" taxation occurs.

When the shareholder realizes the gain from the share price, that gain is taxed. And if it is a short-term holding, that income is taxed like regular income. Nobody is getting taxed at 0%.

If you have little or no ordinary income, a decent chunk of qualified dividends and long term capital gains pay 0% federal income tax. $77k for joint filers in 2018. [0]

Not a particular trustworthy site, but whatever:

[0] https://www.thebalance.com/how-to-use-the-zero-percent-tax-r...

It is, in this case "double taxation" is a term of art and denotes the shareholders' perspective because the shareholder is taxed first on corporate income (as "owners" of the corporation) and second on receipt of their dividends (as part of their individual income).

https://www.investopedia.com/ask/answers/03/102203.asp

A corporation is a separate entity from a shareholder. If a company's corporate income and a shareholder's personal income are the same, surely we should also be OK with lawsuits against corporations also digging into the pocketbooks of shareholders.

That distinction exists for a reason.

The distinction exists for a reason, but that reason doesn't in itself require taxation to happen twice. If I am in business I can pay tax once or, as the owner of a corporation, potentially pay tax twice. I will obviously prefer the former.

Since, as you say, the corporation is legally distinct, whether I own the whole corporation or just part of it is neither here nor there. My objection is the same, which is that there are two tollgates between me and what I see as my share of the income.

Australia's corporate tax system allows for "franking credits". Shareholders receive these from companies based on their proportional ownership. The income tax paid by the corporation may be offset against the income tax owed by shareholders.

Unsurprisingly, Australian companies are much more likely to pay dividends.

Can Australian companies spend unlimited amounts of money on political propaganda without the assent of all their shareholders?

He's not making a normative/semantic claim, he's describing why it's not financially sensible. If I'm considering two ways to transfer money to a target, and one of them passes through a taxation checkpoint twice, I'm naturally going to avoid that.

I am happy to make the normative statement that any tax code that creates such an incentive probably is badly designed, though.

I'm having trouble making sense of your comment. Do you want to break it down for me?

I read your comment as responding to dman under the assumption that he was arguing (1) this taxation scheme qualifies as "double taxation" under some notable definition, (2) double taxation is wrong/bad, and therefore (3) this taxation scheme is wrong/bad. I think in fact he is not claiming any of these, he's just explaining how the incentives faced by the actors drive their behavior.

If you were not actually arguing along these lines and were merely correcting his terminology without rebutting his main point, I would have expected you to preface your comment to this effect, e.g., "Not disputing your point, but technically this doesn't qualify as 'double taxation' because...".

Apologies if I've misinterpreted.

This is different from the employee context because the corporation gets to deduct the compensation expense. So it's a deduction to one party (corp) and an income inclusion to the other party (employee).

Your income from your employer is not taxed on the corporation. It's a cost of doing business and is tax deductible.