So the dividends of the corporation are taxed twice. Fragrant Orchid and Beggar Ying, however, probably chose the corporate form of organization for its advantages over the partnership form, irrespective of tax consequences. So far, we have been discussing corporation income taxes. But there are personal income taxes as well. Further taxes are charged by the states, though at a much lower percentage.
Income taxes are one of the taxing policies of the federal government.
They were permitted by the sixteenth amendment to the constitution and are set regularly by Congress. Likewise, Congress determines how the money shall be spent. For example, the government spends money on defense, the federal courts, the national parks and forests, and public-works assistance.