Recently, Mitt Romney was delivering the standard conservative line on why taxes are evil, when hecklers started shouting that we need to increase taxes on corporations. His response was that corporations are people.
His point was that ultimately all the money made by corporations goes to people, so raising taxes on those corporations taxes all of the people who make money from them. And while he didn’t mention it, “tax corporations” is usually liberal code for “tax rich people”.
In some ways, Romney is right in saying corporations are people. They are granted human rights for some inexplicable reason. But that’s not the point he’s trying to make. And on that point he’s wrong.
There’s an easy way for companies to pay no federal taxes. Really. Don’t incorporate. Any income the business makes passes directly to owners and they pay taxes on that income like any other income. Problem solved. Companies are people!
So why don’t businesses just do that? Because in the terms that Romney is using, corporations are very much not people. By and large, companies incorporate because it gives the owners protection from liability. If the corporation goes bankrupt, and they owe you money, you can’t go after the money of the owner or owners. Only the assets of the company. Company kills someone? Owners protected. Company poisons a rain forest? Owners protected.
One of core reasons for corporations to exist is that they abstract the institution from the people who own it. It’s also one of the core reasons they are taxed separately. If the business itself is liable for debts, not the owners, the same must be true of taxes as they are essentially a form of debt.
In a manner of speaking, those separate (some would say double) taxes are the price you pay to be shielded from the liabilities of your company. And obviously the price is so low that pretty much every big company becomes a corporation.
So here’s the insidious heart of this so called “conservative” notion: owners of businesses should get all of the income of a business (and only pay capital gains tax on it), but none of the liabilities of the business (which should be spread out over all the people it harmed). In a term I’m sure you’re all familiar with from the collapse of 08, they want privatized profits, and socialized losses.
Corporations aren’t people. They are tools we provide the rich so they don’t bear the liability for the sociopathic actions of their creations. That tool is extremely valuable, and if anything, the public should be charging a lot more for it. Think about that. Corporations can effectively cause limitless damage with the only liability being the company’s assets.
If Romney or any other republicans want to do away with corporate taxes, I have a proposal.
No more corporate tax. But no more free limited liability for corporations. Limited liability becomes a cap and trade system. Only 250 companies are allowed limited liability. How much do you think those vouchers would sell for?
Now tell me that corporations pay too much in taxes.