The Supreme Court’s corporate monsters–if money buys them "free speech" rights, can it help them avoid giving others human rights?
by Linda Beale
The Supreme Court decided in Citizens United that corporations could intevene to influence elections–giving money and aide to their selected candidates. This was an inordinate broadening of corporate “personhood”, claimed to be necessary under the warped First Amendment precedents of the Supreme Court that count “money” as speech and thus consider that limitations on money spent to influence elections as a limitation on speech.
Yet most economists and tax professors argue against the corporate tax–which has been in place longer than the individual income tax–on the grounds that taxes distort and that the claimed “double taxation” of corporate income distorts the allocation of capital. See, e.g., Tax Foundation, 2004 paper on integrating corporate and personal income taxes; seminal 1985 integration piece from NBER. Much of the argument boils down to an a prior assumption that “only people can pay taxes.”
(Of course, we used to think that only people could engage in campaign speech or bribe politicians for quid pro quo policies or otherwise influence the course of society. We were naive.)
As a result of this “received wisdom” about economics and corporate taxes–mostly based on the mathematically correct but practically challenged Chicago School approach to understanding economic systems (by assuming away most of the real world, including life, death, and everything in between)– corporate lobbyists and their allies in Congress have been pushing for decades to eliminate corporate taxation through integration of the corporate and individual tax schemes or at a minimum to drastically reduce the liability of corporations for federal income taxes.
Every presidential candidate has one scheme or another to reduce corporate taxes, with even Obama falling prey to the continuing influence of the Wall Street facilitators like Timothy Geithner in the Treasury and Larry Summers. See Citizens for Tax Justice, President’s Framework Fails to Raise Revenue (pointing out that there is no reason not to fix the loopholes in corporate tax to help address the deficit without having to lower corporate rates, and noting that although Obama at least called for making his rate reduction framework for so-called corporate tax reform revenue neutral, his plan fails to raise about a trillion dollars to make up for the corporate taxes that it gives up). As CTJ notes, many organizations have called for the opposite–to raise revenues from corporations that have been paying very little in taxes, especially since the 2003 Bush “reforms” that granted most of the items on corporations’ wish list for tax cuts.
Last year, 250 organizations, including organizations from every state in the U.S., joined us in urging Congress to enact a corporate tax reform that raises revenue. These organizations believe that it’s outrageous that Congress is debating cuts in public services like Medicare and Medicaid to address an alleged budget crisis and yet no attempt will be made to raise more revenue from profitable corporations. Id.
Nonetheless, most candidates call for making the corporate income tax territorial and thus making it even more lucrative for US multinationals to move more of their corporate businesses (and jobs) abroad. Most call for reducing the rates on corporations to a historically unprecedentedly low level–making it even more likely that the US trade deficit and corresponding budget deficit will continue to grow, even at a time when these self-nominated fiscal “conservatives” are claiming that the current deficit requires monumental sacrifices from ordinary people in the way of reduced medical care and old age security (the effort to cut back drastically on the benefits payable under Medicare and Social Security).
Most treat the owners of corporate equity as though they were some kind of revered engine of growth, when in fact they are usually merely rich people who are interested in reaping as high a profit as possible from sales of corporate shares but very little interested in entrepreneurship, and as likely to engage in quick trades (the profits of which go into their pockets and not into the working capital of the corproations) as to hold long-term based on analysis of corporate business fundamentals. Most don’t accompany their form of integration with eliminating the category distinction between capital gains and ordinary income.
Most “corporate reform” plans call for continuing most of the absurd provisions that have larded the pockets of corporate management over the last few decades, such as
- accelerated depreciation and expensing (including all the depletion allowances for the heavily subsidized oil and gas extractive industry, even while it complains about the petty little incentives put in place in recent years for environmentally sound energy generation–accelerated expensing creates “phantom” deductions that reduce taxable income well below economic profits), and
- the “research & development” credit, which was first enacted as a stimulus that was to be in place for a very short period of time but has been extended in fits–even retroactively for several years–as corporations demand making every single “stimulus” tax break they get permanent.
(As readers of this blog know, I see little merit in the R&D credit. Corporations can already deduct way too much “phantom” expenses–excess interest expense that allows them to operate with too much leverage, facilitating equity firm buyouts by leveraging up the purchased entity to pay off the equity strippers. Further, as with so many of the GOP’s favorite programs of tax subsidies for multinationals and the upper crust, it hasn’t bothered to conduct studies to see if the R&D credit indeed results in more research done in this country. Clearly, a retroactively enacted credit does NOT incentivize research.
Probably the times it’s been enacted without being retroactive haven’t either–it takes extensive labs and equipment to do research, and such labs and equipment have to be purchased far ahead of when they pay off. Most of the R&D that the credit supports is likely to be of the “tweak-a-patent” variety that seeks merely to find a way to extend a monopoly profit from a particular profit–something the patent law should frown upon.)
So the drumbeat for lower corporate taxes–at a time when corporations are paying less as a proportion of GDP than they did in the time of our most sustained economic growth–continues unabated from the right joined by only slightly less enthousiastic accompaniment at the White House and think tanks like the Tax Policy Institute.
Meanwhile, the Supreme Court, having anointed corporations with a kind of personhood that lets them intervene in elections even though they have no vote, has taken for consideration a case that challenges the rights of individuals to hold corporations accountable as people are held accountable for human rights violations. The case is Kiobel v Royal Dutch Petroleum (2d Cir. 2010), in which Nigerian plaintiffs seek to hold Royal Dutch/Shell liable for violating the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, which upholds international norms of human rights.
The Second Circuit held that US courts cannot entertain such suits, holding that jurisdiction under the Alien Tort Statute against corporations requires an international norm approving sanctioning corporations for torts and that requires more than the mere fact that most countries treat corporations under their domestic law as capable of committing torts. The court in the Second Circuit opinion makes a point much like economists tend to make about taxes–essentially implying that “only people commit heinous acts”.
From the beginning, however, the principle of individual liability for violations of international law has been limited to natural persons—not “juridical” persons such as corporations—because the moral responsibility for a crime so heinous and unbounded as to rise to the level of an “international crime” has rested solely with the individual men and women who have perpetrated it. Second Circuit in Riobel.
While people are the “deciders” of corporate decisions, nonetheless the corporate form permits corporations to engage in conduct that individuals alone cannot engage in–from amassing huge resources to carrying out massive enterprises that pollute and steal human dignity. To ignore that reality of corporate wrongdoing, especially in an age that has anointed corporate personhood with rights that seem furthest from ones that corporate entities should be permitted to enjoy, would be folly.
For further discussion of the implications of the case, see Peter Weiss, Should corporations have more leeway to kill than people do?, New York Times (Feb. 24, 2012).
Suffice it to say that this case raises the specter of full-blown corporatism overtaking the entire U.S. economic and social system. If the Supreme Court accompanies its “personhood for free speech/election intervention rights” with “not people so can’t be touched for human rights violations”, there will be even fewer ways to hold multinationals accountable, and they will forge even stronger relationships with autocratic dictators who treat their citizens like slaves and their environments like garbage pits. Meanwhile corporations will continue to intervene in our elections at will (usually the will of their ultra-wealthy managerial class), using the extraordinary power of the resources at their command.
We will all be the worse for any decision that would allow multinationals to expand their quasi-sovereign rights without saddling them with a strong obligation to comply with international norms respecting human rights. Rights without obligations are invitations to corruption.
crossposted with ataxingmatter
Linda
it seems to me the fiction that shareholders “own” the corporation is the bottom of the “double taxation” poor me, poor us fantasy.
i doubt there is any way to change this. i can only be glad that so far no one has taken seriously the idea of eliminating either the corp tax or the tax on dividends.
but that’s “so far.” my next guess is that the corps are about to eat us all. these monsters are effectively the old land-owning class and they will not rest until all us serfs know our places. then they will eliminate taxes on themselves entirely, rule absolutely with only squabbling among themselves being the only limit on their power.
nevertheless, it is necessary to keep talking about it as if we could do something about it.
the average investor is no more an owner of the corporation than the guy with a stack of blue chips is an owner of the casino.
“Meanwhile, the Supreme Court, having anointed corporations with a kind of personhood that lets them intervene in elections even though they have no vote,”
Unions, PETA, the NRA and the AARP don’ty have the vote either. But they’re allowed to contribute to elections.
So why not corporations? Why some collectives of people should be able to and other collectives of people not seems most odd.
Linda,
In both your links individuals can be held accountable. People authorize the killings, not a corporation. And people should be held accountable. A Corporation can’t do anything, Only people can. Someone at Royal Dutch Shell commttited an act that was illegal (I think – it wasn’t clear). That individual should be held accountable.
Or do you really beleive that the CEO and Senior executives sat around a table and gleefully rubbed their hands while cackling over a body count in Nigeria?
I understand you don’t like Citizen’s United. Then get it changed, personnaly until they stop ALL organizations (from Corporations to Unions to PETA to the NRA) from contributing to elections I see nothing wrong with letting any collection of people contribute to elections. Your gripe, as is most from the looney left, is the ‘wrong people’ are allowed to speak. The looney left can’t stand the concept of free speech. Its the left that shouts speakers down, its the left who impose speech codes on campuses, always the left that wants to control and prevent speech. Its like your terrrified someone may say something you don’t like or can’t control.
And it really is all about control, isn’t it? George Orwell wasn’t warning us about the right in 1984…
Islam will change
If corporations are persons is not the buying and selling of such persons the slave trade?
“most economists and tax professors argue against the corporate tax”
Really?
Tim
politics is odd. try to remember it’s about power. then the rationalizations won’t seem so bizarre to you.
when the day comes that Unions threaten to take over the country, i’ll be voting against them.
for what it’s worth, within the limits of human “logic”
i agree with Worstall that the argument against corporations buying congressmen on the grounds that they are not people is tenuous. i prefer an argument based on their danger to democracy. and i believe their power to buy elections could/should be restricted on other grounds. limits to their charters would be the place i would start.
buff
i bet i have more reason to have contempt for the looney left’s restrictions on free speech than you have. nonetheless, the looney left is not in a position to establish a thousand year reich in America.
coberly,
And neither is the crazy right. Just the looney left HAS been successful with its attacks on free speech. Unlike the right.
And you have not been following Obama to well either lately. Between a Democrat President chewing up SS and signing laws for indefinite detention of Americans without trial, the left is well on its way to their version of the Reich.
That all the laft and Democrats.
Islam will change
i should have said politics is about power, law is about rationalization. Tim has reached the level of cognitive awareness where he understands that what’s good for corps is good for share prices and therefore good for Tim.
don’t expect him to think further than that.
buff
i worry about your memory. the one person here who has been harder on Obama than you is me.
the crazy right is not a danger to the republic. the corporations are.
there is no question in my mind but that O and the dems in general are bought and paid for by the corps. the crazy right is merely what the money people fund to distract the looney left.
One good argument is that the organizations you list were specifically created to do advocacy on behalf of their members, to organize political activity.
Corporations were specicially created to make money, to organize economic activity.
Corporations are not designed to represent the political interests of their owners, and owners usually aren’t thinking much about the political activities of the corporations they buy bits of. They should therefore be expected to do so poorly as a rule.
buffpilot: “And people should be held accountable. A Corporation can’t do anything, Only people can.”
Corporations are people. Remember? 😉
Joking aside, when people join together, whether in corporations or other associations or institutions, they take on a measure of responsibility for the actions of those corporations, associations, or institutions.
buffpilot: “Someone at Royal Dutch Shell commttited an act that was illegal (I think – it wasn’t clear). That individual should be held accountable.”
Indeed. But that does not mean that the accountability stops there.
buffpilot: “Or do you really beleive that the CEO and Senior executives sat around a table and gleefully rubbed their hands while cackling over a body count in Nigeria?”
That is not necessary to hold the corporation accountable. Was the culprit acting as their agent? Penalizing the corporation penalizes them to a certain extent. The law is a blunt instrument. We are not going to get perfect justice or fairness. Maybe some owners or employees will be penalized too much. But if there is no penalty at all, maybe some will be penalized too little.
“George Orwell wasn’t warning us about the right in 1984…”
Orwell was telling a tale about totalitarianism running rampant. Totalitarian regimes are not defined by their supposed economic ideology. Such regimes are recognized by their use of power to control their citizens. Talk of right and left is an ambiguous description which is further confounded by talk of socialism. And that is grossly confused by many on the far right being unable to recognize that there is virtually no representation of left wing ideology in our government in modern times. To suggest that Obama, or any Democrat is on the left is only to suggest that they are not as radically far right as has become vogue in Republican Party rhetoric. At best Obama is a Jacob Javitz style Republican. The entire Democratic Party has abandoned its obligations to the working class in search of a place at the tables of the wealthy. Obama as socialist is absurd. If he is seen on the left it is only to the left of our modern day Three Stooges, Mitch M., John B. and Eric C.
Min,
My reply to Beverly applies here also, you go after the people who accomplish the crime. The US does not do guilt by association prosecutions. We don’t round up an entire OWS encampment and charge them all for assault and rape when a rape occurs. We arrest the rapist. But that is exactly what you wish to do.
So what you saying is if a Line manager of GM orders two union employees to kill say the Governor of Michigan. They succeed. Then instead of prosecuting the manager and his thugs, you should be able to sue and kill GM and the UAW and put the thousands of people who had no connnection to the crime out of work.
Correct?
Do you not see the logical fallacy here?
GM cannot order someone to be killed. A person can though.
Citizens United just allowed a group of people, in this case a corporation, the same free speech rights as any other group of people, like the UAW, or PETA, or AARP, or the NRA.
(Now that does not mean I’m predicting what the court will do, I’ll leave that to the court watchers. The Supremes have been creating law from thin air as far back as Roe and probably farther)
Islam will change
jack,
Obama is the leader of the Democratic Party and the standard bearer of the left. I see no primary opponent or even a fig leaf attempt to find one. I see no third party building on the left to take that mantle from him. So no matter how much you bewail that Obama is not part of the left. he is. Either that or your out in the fringe.
And to deny Orwell’s 1984 was not a warning about the left and communism is laughable. get a grip
Islam will change
buff
don’t look now but
whatever Orwell was thinking, 1984 should have been a warning about how any totalitarian system can ruin your day. state communism was totalitarian. state corporatism is getting to be as close to totalitarian as we can have any hope of stopping before it is too late.
you seem unable to understand that Obama and the “Democrats” are just as much a part of the charade by which they fool you as the Republicans. As long as they can keep you hating the Democrats they can be pretty sure you won’t notice their hand in your pocket. They are not feeling around for your wallet. They already have that. There is no “left” in American politics.
unless by “left” you mean the folks running around calling for a welfare state. nope. they is dupes and dupers of the charade, just like you. this was pretty much given away when they all started falling all over themselves calling Social Security a “jobs killing tax.” note the “all.”