James Pethokoukis

Politics and policy from inside Washington

Why Romney’s right that ‘companies are people’

Aug 11, 2011 22:00 UTC

Liberal groups, like Think Progress, are jumping all over Mitt Romney for this (via TP):

Mitt Romney completed a rowdy campaign stop at the Iowa state fair, before a key Republican debate tonight and an upcoming Iowa straw poll. At the end of his speech, a Q&A session quickly devolved into a shouting match during which he defended the rich, argued for cutting entitlements, and equated corporations with people. Romney told a group of angry Iowans that raising the retirement age to protect corporate tax breaks is appropriate. “Corporations are people, my friend,” he said.

Now I don’t think Romney was making a legal argument about corporate personhood, which is well established concept in US law:

In the United States, corporations were recognized as having rights to contract, and to have those contracts honored the same as contracts entered into by natural persons, in Dartmouth College v. Woodward, decided in 1819. In the 1886 case Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, the Supreme Court recognized that corporations were recognized as persons for purposes of the Fourteenth Amendment

Rather, I am pretty sure he was trying to say that corporations are made up of people, but not in a Soylent Green sort of way. Rather they are comprised of workers generating goods and services for customers. And when you punish corporations, you punish workers and shareholders and customers. A few additional points:

1) Here an interesting bit from an OECD paper on taxes and economic growth

Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes. …  A second option is to reform corporate taxes, as they influence productivity in several ways. Evidence in this study suggests that lowering statutory corporate tax rates can lead to particularly large productivity gains in firms that are dynamic and profitable, i.e. those that can make the largest contribution to GDP growth. It also appears that corporate taxes adversely influence productivity in all firms except in young and small firms since these firms are often not very profitable.  … Lower corporate and labour taxes may also encourage inbound foreign direct investment, which has been found to increase productivity of resident firms. In addition, multinational enterprises are attracted by tax systems that are stable and predictable, and which are administered in an efficient and transparent manner.

2) And here is economist Greg Mankiw addressing the topic in his popular economics textbook:

Many economists believe that workers and customers bear much of the burden of the corporate income tax. To see why, consider an example. Suppose that the U.S. government decides to raise the tax on the income earned by car companies. At first, this tax hurts the owners of the car companies, who receive less profit. But over time, these owners will respond to the tax. Because producing cars is less profitable, they invest less in building new car factories. Instead, they invest their wealth in other ways—for example, by buying larger houses or by building factories in other industries or other countries. With fewer car factories, the supply of cars declines, as does the demand for autoworkers. Thus, a tax on corporations making cars causes the price of cars to rise and the wages of autoworkers to fall.

The corporate income tax shows how dangerous the flypaper theory of tax incidence can be. The corporate income tax is popular in part because it appears to be paid by rich corporations. Yet those who bear the ultimate burden of the tax—the customers and workers of corporations—are often not rich. If the true incidence of the corporate tax were more widely known, this tax might be less popular among voters.

3) Finally, economists Kevin Hassett and Aparna Mathur on who bears the burden of corporate taxes: “The results in this paper suggest that corporate tax rates affect wage levels across countries. Higher corporate taxes lead to lower wages. A 1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.”

 

 

 

 

COMMENT

Thomas Paine said it best in The Rights Of Man in 1791.

“It has been thought that government is a compact between those who govern and those who are governed; but this cannot be true, because it is putting the effect before the cause; for as man must have existed before governments existed, there necessarily was a time when governments did not exist, and consequently there could originally exist no governors to form such a compact with. The fact therefore must be, that the individuals themselves, each in his own personal and sovereign right, entered into a compact with each other to produce a government: and this is the only mode in which governments have a right to arise, and the only principle on which they have a right to exist.”

Thomas Paine and others of the Revolutionary Era realized that any institution made up by and of humans – from governments to churches to corporations – must be subordinate to individual living people in terms of the rights and powers held by the institution.

Corporations only gained equal status with people after decades of assault on the Constitution by the railroads in the 1800′s. The peak year for their legal assault was 1877, with four different cases reaching the Supreme Court in which the railroads argued that governments could not regulate their fees or activities, or tax them in differing ways, because governments can’t interfere to such an extent in the lives of “persons” and because different laws and taxes in different states and counties represented illegal discrimination against the persons of the railroads under the Fourteenth Amendment.

In 1886 the Supreme Court ruled on an obscure tax issue in the case Santa Clara County vs. Union Pacific Railroad, but the Recorder of the court, a man named J. C. Bancroft Davis, himself formerly the president of a small railroad wrote into his personal commentary of the case that the Chief Justice had said that all the Justices agreed that corporations are persons. This, in fact, was not true at all.

In so doing, he – not the Supreme Court, but its clerical recorder – inserted a statement that would change history and give corporations enormous powers that were not granted by Congress, not granted by the voters, and not even granted by the Supreme Court. Davis’s headnote had no legal standing, but was taken as precedent by generations of jurists, including the Supreme Court who followed and read the headnote but not the decision.

The Founders never intended corporations to have the same rights as citizens. It doesn’t matter how many rationalizations the right wing think tanks disseminate to their armies of bloggers and pundits. It is only because of an obscure headnote written by a corrupt Supreme Court clerk in an obscure railroad tax case that took place in 1886 that they have been able to excercise such power, and to the detriment of the People.

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Just where is the GOP on taxes right now?

Aug 11, 2011 20:26 UTC

After the recent debt ceiling debate, Republicans seemed pretty unified in their stance against raising taxes. But here is Ways and Means Chair Dave Camp, just appointed to the new debt supercommittee:

A leading Republican lawmaker would not rule out tax increases on Thursday if they could boost economic growth, adding that “everything is on the table” for a congressional panel charged with forging a deal to cut the deficit.

Representative Dave Camp, head of the tax-writing Ways and Means Committee in the House of Representatives, told Reuters in a telephone interview that the deepening global financial crisis would prompt him and other super committee members to pull together. …

“I don’t want to rule anything in or out,” Camp said. “I am willing to discuss all issues that might help us reduce our short and long-term debt and grow our economy,” Camp said. ”Everything is on the table, until we as a group rule it out.”

Bet the House GOP leadership didn’t like that one bit, though perhaps Camp was just trying to appear non-absolutist on the issue. After all, if Democrats tossed Obamacare over the side and embraced pro-market entitlement reform, perhaps some concession on taxes wouldn’t be out of order

Now let me also point out comments by Sen. Pat Toomey, another GOP member of the supercommittee, to Politico which may also leave a smidgen of wiggle room: “I think some kind of big tax increase is just … not going to be part of this,” Toomey said.

But what about a not-so-big tax increase? Maybe something from this menu of options (via MF Global):

§ Modification of Mortgage Interest Deduction – Repeal raises $484B over five years

§ Carried Interest – $10B-$15B over 10 years

§ Spectrum Sales – $10B-$15B

§ Higher Guarantee Fees for Fannie Mae and Freddie Mac – $30B

§ Repeal of LIFO Accounting – $70B over 10 years

§ Bonus Depreciation (the corporate jet tax)

§ Repeal of oil and gas subsidies – $40B

§ Repeal of Renewable Energy “tax subsidies”

§ Deferral on foreign income of multinationals – $70B over 10 years

§ Medicare Part D Rebates/Dual Eligibles – $112B over 10 years

I am somewhat relieved, then, by what Toomey added:

Still, Toomey said he is open to reforms of the tax code “because there are tremendous inefficiencies in our tax code.” He said he would like to see “all kinds of deductions and write-offs and special-interest loopholes” eliminated and then “correspondingly lower the marginal rate so we encourage investment and economic growth.”

Exactly. Simplify the tax code and use the revenue to cut marginal taxes. A more efficient tax code, especially one that stopped penalizing investment, would boost tax revenue by boosting growth.

COMMENT

If the C.E.O.s like Larry Young, of Motts brands did not have to earn 13,500$ per hour or 26.5 million per year; then he could easily pay people 25$ to 30$ per hour an their tax base alone would help pay down the Government Deficit.
If American C.E.O.s, were not so anxious to run to China; Where they pay next to no taxes, an comparetly no living wage, we would have Companys an Jobs, an thus an economy in America.
Apparently abortting babys, an sending American jobs to China is a great thing! For I can not find anyone upset about these. In Short Greed, LOVE of money is the root of all evil.

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