So the basic point is that in any economy, a given dollar supports a multiple of one dollar in income. The US GDP is roughly $13 trillion dollars, which is roughly equivalent to the total national income (http://en.wikipedia.org/wiki/Gross_domestic_product#Income_a...), but there are a lot fewer than $13 trillion dollars in circulation.
Now, when you buy something with a post-tax dollar, that money will get taxed again, but that is not double taxation. That dollar is counting towards income again when you spend it.
So say in the first example, the buyer made $200k in salary and capital gains, on which he paid 25% in taxes and was left with $150k. He then bought the property from the seller with that $150k, and the seller paid tax on the $50k of capital gains. Say this all happened in the same tax year. So the buyer reported $200k of income, and the seller reported $50k of income. That contributes $250k to the GDP. And taxes were paid on that $250k. No income was taxed twice.
Now compare this to a corporation. Say it makes $1m in profits after expenses. It is taxed 30% on these profits, leaving $800k. It then distributes this $700k via a dividend to its shareholders, who are taxed another 15%, leaving $595k. This example does not involve $1m + $700k of income. Only $1m of income is added to GDP. But that same income is taxed twice: once as corporate taxes and again as capital gains.
Now, when you buy something with a post-tax dollar, that money will get taxed again, but that is not double taxation. That dollar is counting towards income again when you spend it.
So say in the first example, the buyer made $200k in salary and capital gains, on which he paid 25% in taxes and was left with $150k. He then bought the property from the seller with that $150k, and the seller paid tax on the $50k of capital gains. Say this all happened in the same tax year. So the buyer reported $200k of income, and the seller reported $50k of income. That contributes $250k to the GDP. And taxes were paid on that $250k. No income was taxed twice.
Now compare this to a corporation. Say it makes $1m in profits after expenses. It is taxed 30% on these profits, leaving $800k. It then distributes this $700k via a dividend to its shareholders, who are taxed another 15%, leaving $595k. This example does not involve $1m + $700k of income. Only $1m of income is added to GDP. But that same income is taxed twice: once as corporate taxes and again as capital gains.