I’m sure Mitt Romney wishes he’d made the point he wanted to make yesterday without saying “corporations are people.” We’ve all had some fun with it, including me. That said, can we stop playing stupid?
Romney was making a fundamental, noncontroversial point: corporations are groups of people, and if you raise taxes on them, they’re going to pass those costs on to the public. Or should I say he was trying to make that point — he said, “You can raise taxes,” then got pulled in another direction.
But, really, this isn’t hard.
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Stephen Stein
“ corporations are groups of people, and if you raise taxes on them, they’re going to pass those costs on to the public”
This has long been a staple and easy-to-understand argument about corporate taxes. But recent events have caused me to question it.
If that statement is true, the converse should also be true – if taxes fall, costs to the public should fall as well. But that has turned out NOT to be true – during the recent FAA funding debacle, taxes on airline travel fell to zero. Was this windfall passed along to the public? Heck no! The airlines pocketed the cash (with the sole exception of Alaska Airlines, which dropped its prices).
I think it’s fairer to say that costs to the public will be as high as the market will bear, regardless of taxes.
(This brings up a grammatical point as well – if the antecedent is “Alaska Airlines” is “which” correct, or must I say “who”?)
Mike Benedict
What would be significant is if the Mittster would unveil a plan for getting US corporations to repatriate the hundreds of billions they hold in cash offshore. That money is much needed for investment and new jobs in the US.
But of course, since Mitty was responsible for convincing said companies to move their operations offshore in the first place (and lined his own pockets handsomely while he did it), it could easily be argued that Mitt Romney was more responsible for the destruction of the American economy than all of Wall St. and the mortgage industry put together.
And this man wants to run our country. Heh. He’d probably move the White House to Beijing.
Jim Chiavelli
DK, you’re right. I saw the clip said: Wow, that’ll show up in an attack ad soon, but it’ll be unfair.
People do end up with the cash raked in by a corporation – maybe not the people whose side the government should be taking, but actual breathing people. (And can we work to stop the sloppy shorthand of “corporation” for “monstrous soul-destroying machine”? I owned a pair of weekly papers through an S-corporation, and never considered myself all that monstrous.)
There’s so much other legitimate material to beat the guy with, using this line would be gratuitous (OK, also fun, but still). Plus, given his history, by next week he’ll be arguing that he’s always believed corporations are not people.
C.E. Stead
@ – Mike – Romney HAS advocated a taxation-neutral repatriation of off-shore money, to bring it back into the US economy. That would allow the invetment and job creation of which you speak.
This issue is an excellent example of why the tax-the-rich schemes don’t work. The TRULY rich have the means to legally avoid these taxes, and they wind up costing the beauty salon with the $250,000 gross instead.
Or, as I’ve said before, the class warfare taxation school aims to shoot the plutocrat between the eyes, and hits the middle class in the gut instead.
Ben Starr
I’m with @Stephen Stein (although i didn’t hear romney say the quote you present at the top of your post). Don’t corporations work to get the highest prices that the market will bear? Cost structure is seemingly irrelevant.
Dan Kennedy
@Jim: “And I’ve been totally consistent on that,” he’ll add.
Keith Vance
As an expert on people, I’ve been a person for almost 40 years, I can say without question that corporations are not people.
Corporations are legal entities that allow people to work together to solve some sort of problem, such as, how can we get 10,000 people to work under one legal entity in a reasonably not-confusing way.
I think the real question isn’t whether corporations are people, but rather, do corporations even exist at all?
But then Rand Paul took this argument into entirely new direction by saying that, yes, in fact, corporations are people because people own corporations.
Whoa dude. That’s trippy.
But I, as a person, own lots of things, are all of these things people too? My Volvo is a person. My laptop is a person. Not only did Rand Paul just blow everyone’s mind, he’s good at that, but he just expanded the voting population by like 100 billion or more.
I wonder who my antique radio is going to vote for next year?
Rich Carreiro
“ corporations are groups of people, and if you raise taxes on them, they’re going to pass those costs on to the public”
That is true.
“If that statement is true, the converse should also be true – if taxes fall, costs to the public should fall as well. “
That is also true.
“But that has turned out NOT to be true”
That is false.
The problem is that for whatever reason you are defining “the public” to be synonymous with “customers” only and are ignoring “employees” and “shareholders”.
No corporate tax is paid by the corporation. It’s collectively paid by the corporation’s customers, employees, and shareholders. The proportion of the tax each group pays depends on the relative elasticities of demand and of labor. (This all basic “tax incidence” stuff.)
For example, if demand is very inelastic, the tax will fall almost entirely on the customer. If demand is very elastic, the tax will almost entirely on shareholders+employees. If in that case labor is also very inelastic, the tax will end up falling mostly on shareholders. If labor is elastic, the tax will end up falling mostly on employees. And of course in the in-between cases the tax will fall in some proportion on all the groups.
Separate from tax incidence, another thing ignored by the knee-jerk “corporations are EEEEEEEEVIL” crowd in the specific case of the FAA tax was that was a non-zero chance that Congress could have reinstated the tax retroactively. (Yes, Congress has the power to impost taxes retroactively and has in fact done so and has had it upheld by SCOTUS — there was a big brouhaha about this during the Clinton administration. The ex post facto prohibition has been read by the courts to pretty much only cover laws creating crimes.)
So it made a lot of sense for the airlines to raise the price by the amount of the tax and keep the “tax” money in the bank in case Congress demanded they cough it up. Turns out Congress didn’t reimpose the tax retroactively, but it could have.
Keith Vance
The argument that corporations are people was never really thought through, but it has become so.
The Supreme Court and our democracy have granted the corporation status as a person for the purpose of engaging our democracy.
One could argue that’s a horrible idea. Corporations don’t die. They can go out of business, but many live far longer than human beings do. Corporations can amass vast sums of wealth beyond that of most mere mortals. Large corporations can leverage their army of human capital, employees, to impact the democratic process with far more sway than even a labor union can. “Help the corporation, or you’re fired.”
One of the reasons prisoners can’t vote while incarcerated is that there’s a very real fear that the warden will simply force all of the inmates to vote for a particular candidate. Stripping ex-convicts of their right to vote is another story for another day.
The idea of giving corporations the same rights as people is a radical idea and one that should be debated, but apparently the argument is over and the corporations have won. It’s hard to see how a democracy is benefited by doing so.
My prediction is that historians will one day look back at this decision as a bad one.
Dan Kennedy
@Keith: Romney was not talking about the legal status of corporations as persons.
Tony Schinella
I don’t know if the concept of corporations passing on taxes to customers is true or not true. It sounds logical. The larger thing is if the market will bear the increased cost from the taxes or not. Sometimes, businesses just have to eat it and they do; other times, they pass the costs on, I’m sure.
Would GE, if they had to pay 28% or 15% or anything more than 0% raise those prices onto its customers of jet engines or nuclear power plants or washing machines? If they couldn’t do that, would they cut workers? Possibly. That’s a bigger worry.
We see this though with fuel prices being passed along in food prices and we see those prices fluctuate accordingly, being passed onto customers. So, if that happens, so would taxes, in my mind. Since I do the shopping in my house, and always have, I know the cost of everything and when it goes up and down.
Now, two other points. First, they do go down: For the most part, food prices seem to have stabilized or even dropped since the 2008 burst to $4 per gallon. Overall, I’ve tried to save money and buy more vegetables and other things, so my overall bill has gone up because veggies rarely go down.
The second point: In fact, things like cereal, granola bars, pasta, and other items that I buy every week for my family, seem to be becoming more competitive, with coupons, sales, and other things that have actually lowered the prices. Clearly, people aren’t buying things because they have to move product. To move the product, they lower the price.
One person I know who owns a restaurant said to me recently that whenever his taxes go up, he just eats it. He noted that when he opened his pub, he was charging $4 for a beer. Now, it’s down to $3, because people can’t afford $4 and he needs to stay in business (on Tuesday nights, drafts are $2!). Now, drafts at a pub are not a necessity and people aren’t spending money, worried about the future. But, to keep his livelihood going, he needs business.
Having interviewed a bunch of the Republican presidential candidates at this point, it’s interesting to hear them talk about the corporate tax code. They continue to say that the corporate tax needs to be lowered to make companies more competitive and the jobs will come back to America. But, as we all know, most companies don’t pay the rates and the labor costs are insanely low in these other countries. You can drop to corporate rate to 0 and the jobs aren’t coming back.
As well, as the WSJ noted two days ago, the top companies in the S&P 500 are hoarding $1.2 TRILLION in cash right now; last year, they only had $800 billion on hand. This tells me that the corporate tax rate isn’t a problem. So, they’re hoarding money and not hiring people, making everyone else work longer and harder often for the same money or less.
The only way to bring the jobs back is to raise tariffs on imports and very few candidates are going to do that because they have been indoctrinated into this free trade cult that they never feel the repercussions of. Lastly, as I have said before, the larger national problem about debt, deficits, and the economy, in general, is the fact that our manufacturing has been carved away and sent overseas.
Keith Vance
@Dan: You don’t think his comment has anything to do with the conservative agenda to treat corporations as people? Maybe not, but that’s how I see it.
Dan Kennedy
@Keith: Yeah, he was talking as a conservative who’s against taxes and who’s very much in tune with corporate America. But he clearly was not commenting on the constitutional theory of corporate personhood.
Al Fiantaca
Just because an argument can be made in support of Romney’s statement about corporations and people, it doesn’t mean he was smart to say it. Like his gaff trying to compare himself to an unemployed man, and the one about some woman up in NH grabbing his butt, they point up how tone deaf he is to the average voter and their concerns. You could call him a poindexter or a barney for his cluelessness, but that would just make like of it, and anyone so out of touch with what we are feeling and thinking shouldn’t be president.
Dan Farnkoff
Pork chop on a stick- nothing better than that!
Dan Kennedy
@Dan: You know how you can tell how much they hate it? When they say it three times.
Dan Farnkoff
Exactly- you can tell he was really thinking “When can I get the heck away from these people?”
You know what would make Romney a lot more interesting? If he were to “come out” as a polygamist, a la Bill Henrickson. He could be that guy who argues for religious freedom and has a few wives who freely chose “the principle”. At least then he’d stand for something.
George F. Snell III
Calling a corporation a group of people isn’t accurate, Dan. In fact, the reason to establish a corporation in the first place is to legally protect and shield the people who formed the corporation in the first place.
As a result, corporations aren’t groups and pretending they are simply a group of people – kind of like a book group or a stamp club – is being a bit silly.
Technically, corporations are legal entities with limited liability and special protections under the law. In many ways, they have more rights than a regular group of people.
Dan Kennedy
@George: You’re making a legal argument, and I might agree with you. That’s not how Romney meant it.
Mike Rice
Romney’s audio-animatronics are enough to make the Imagineers at Disney World cry.