> Dividends don't magically appear out of nowhere; they're paid out of profits, just like a salary. (Some companies pay out the majority of their profits as dividends, others pay none at all.) They'd either get taxed at the business because they're not paid out, or taxed at the shareholders because they are, not both.
This is not how it works. Salaries are not paid from profits. After the salaries and all the other costs of the business are paid, the company gives the state its share of what is left and keeps the rest (profits). Dividends are paid with this money that is left after taxes. And then (in general) are taxed again when the shareholder receives them.
I'm well aware of how the situation works today; this was a hypothetical different structure. And I'm specifically suggesting that dividends and salaries should both effectively be treated as "costs" that reduce profits.
I'm sorry, I misunderstood your comment. I assume you would not consider costs other uses of capital as buybacks, acquisitions or investments? In any case, I think it would be easier to tax dividends together with the rest of the profit and make it tax-free for the receiver. Otherwise you would have a problem with foreign shareholders and in particular with foreign-owned subsidiaries that would otherwise pay no taxes. There are already mechanisms to tax these distributions, but if you move the taxation of dividends fully to the shareholder side the resulting system would become even more complex.
This is not how it works. Salaries are not paid from profits. After the salaries and all the other costs of the business are paid, the company gives the state its share of what is left and keeps the rest (profits). Dividends are paid with this money that is left after taxes. And then (in general) are taxed again when the shareholder receives them.