Some Thoughts on Corporations, Taxes and Personhood

Meagan McArdle over at The Atlantic has an interesting proposition — abolish corporate taxes completely and instead collect taxes from individual human beings.

She’s written about this before, and she does so again in a piece on why General Electric probably paid U.S. federal income tax in 2010 (and also why probably is the best answer, given the complexity of corporate taxation in the United States). Taxes neither excite nor agitate me, but I suspect there is more wisdom in her position than not.

A lot of this hinges on the legal definition of corporations as persons. I’ve never been a fan of corporate “personhood.” The Supreme Court’s Citizens United decision of 2010 was the right decision — not because corporations are persons entitled to free speech rights, but because corporations are covered under the last clause of the First Amendment:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

The corporation itself doesn’t have rights — it cannot — but its shareholders have rights as a group of people assembling and petitioning the government.

I recall there was, in the late 1980s, a much more egregious ruling in which corporate personhood was affirmed. In 1986, the U.S. Supreme Court ruled that the Pacific Gas & Electric Corp. — a monopoly power provider in Northern California — did not have give space in its billing envelopes to a consumer advocacy group which wanted to say not-so-king things about PG&E because the company had a “free speech” right not to distribute a message it disagreed with. I find this decision repugnant because the issue is PG&E’s state-granted monopoly, which makes its “customers” a captive audience. That, however, didn’t seem to enter into the decision making calculus. Oh well.

Back to McArdle. Unlike a lot on the libertarian/anarchist fringe, I don’t get all that hung up on taxes and taxation. I dislike paying for the warfare state, but that is not so much a dislike of paying taxes (I find it interesting that the people most angry about taxation are those most likely to support war, conquest and domination) as it is what taxes go for. Were America a normal country — one that did not take upon itself the management and policing of the world, or even part of it — I’d likely be a social democrat. But America isn’t, and I’m not.

The problem with taxation is that governments like collect as much as they can but they also don’t want to tax people who can fight back. Historically (and this has been true for as long as humans have written history), the rich shift the burden of taxation to the poor. And they are generally successful in doing this. It’s easier to collect taxes from the poor (they may have less money, but they cannot effectively fight back). It’s easier to have the poor support the rich, especially if government empowers them to take (or does the the taking and then transfers that money to wealthy). I do not like the language of “fair share” in regards to taxes, and I have no idea what a “fair share” of taxes from the wealthy would be. That depends on what a community or society want government to do. And we can no longer agree upon that in America.

But I do know, as much as I dislike the Progressive Era and the New Deal, that the very wealthy of those eras in the United States actually taxed themselves. That 90% top marginal tax rate was not the work of bank robbing anarchists and socialists suddenly wielding state power, it was the work of bank owning plutocrats. I’m not arguing for 90%, or any other rate, but just noting that the wealthy were not the victims they decided in the 1960s and 1970s that they would be.