What is double taxation

A post asks about double taxation on interest paid to 401K loans. The reason was to repay the loan and interest, one has to use after-tax income, where the eventual distribution from 401K will be taxed again.

Hmm, how about this: borrow 50K today, tomorrow pay back with same 50K. Is there double taxation?

I don't see that. The money borrowed is pre-tax, you use it for whatever reason, it's still pre-tax. When you pay back, you're only paying back what you borrowed. It's NOT double taxation. If this is only reason not to used loan from 401K, it's a wrong reason.

The only (meaningful) double taxation scenarios that I can think about are 2:

1. You own a business that makes money. Then when the profit is distributed to you, you pay income tax. That is double taxation. But in RE, you can choose to use pass-through LLC to avoid this situation.

2. You earn your income that you need to pay tax. Then when you buy things, you pay sales tax. This is double taxation, but it's how the system is set up. Ultimately, somebody has to pay for all the roads, government like fire station and police station, and school. Income tax, sales tax, coorporate tax and property tax, as I think, are the main revenue to pay all these services.

Hope this helps.
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