Monday, August 22, 2011
When is a Corporation a Person
The Supreme Court has decided that a corporation is a person with respect to free speech and supporting political causes. A corporation has the same rights as any other person in such matters. The Court has not yet decided that a corporation should be allowed to register as a voter and cast a ballot. In addition, corporations are not (yet) subject to various laws. A corporation can not be indicted and tried for murder it its practices endanger the lives of miners, as an example. In that respect and others, a corporation is not (yet) a person. However, with respect to doling out money to candidates, it is a person, and a very big one at that.
Congress has decided that the money that a corporation pays out in dividends to investors should not be taxed as ordinary income. Some in Congress argue that such money should not be taxed at all, because the corporation has already paid income tax on the income before paying the dividends. Now, this policy makes no sense if the corporation itself is a person. I am a person. I pay a gardener a sum of money each month for taking care of my lawn and plants. The gardener has to pay income tax on the money I provide him. It would do him no good to argue that I have already paid income tax on the money. Yet, this argument works in Congress. The argument is that since I own stock in a particular corporation, I own a share of the company and, through my ownership, I have already paid income tax on the dividend. Therefore, I shouldn't have to pay tax on the dividend. "Double taxation of dividends" is the slogan.
So, what is it? I own shares in an electric power utility in Wisconsin. Is that corporation a person - in which case my dividends should be taxable like any other ordinary income - or isn't it? I am personally opposed to granting the power company the status of personhood. I know that the political issues and candidates that the utility supports are chosen by the Board of Directors. I've never seen a proxy soliciting my choice of which Wisconsin candidate for governor or which candidate for senator I would like the firm to support. Those directors mostly are Republicans, I suspect, and their choices of candidates and issues are not mine.