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Corporations are People Too
In the swirl of campaign finance reform proposals, we keep hearing how restrictions on corporate involvement are impossible because the Supreme Court says corporations are "persons" in the eye of the law. The rationale seems to be that all "persons" have First Amendment rights of free speech, and any restrictions on costly political activity by corporations would abridge those rights.
Just one question: Does the IRS know about this?
If corporations are persons, like you and me, I figure by all rights they should fill out those 1040s just like you and I do.
After all, why should Uncle Sam get first crack at our paychecks, but last crack at corporate money? Corporate citizens should be treated like real citizens – the Supreme Court says so.
If you've ever been in business, you know (and if you've never been in business, you probably suspect) that right now businesses get all sorts of tax breaks that you and I do not. They get to pay in pre-tax dollars for many things that you and I can get to buy only after Uncle Sam has taken his chunk. Like their electric and phone bills. Like the cost of their company cars (or jets). Like magazines and newspapers. Like the food consumed in business lunches in places that make out real receipts and accept company credit cards. (When was the last time you got to deduct that home-made ham sandwich tucked under that nice hot thermos?)
Let's look at those 1040s. Right now you and I get an exemption of $2,650 for every dependent, including ourselves. Under an equal-treatment plan, businesses should too. Businesses should be able to take an exemption for every employee on the payroll. I'd even be willing to let businesses take the standard single's deduction of $4,150 for every person on the payroll, whether single or married.
But only full-fledged employees would count. You and I have to pay the plumber and the snow-plow guy with our after-tax dollars. Business consultants are like the snow-plow guy and other independent contractors. Businesses should pay them in after-tax dollars.
That's all I'd let them deduct off their gross income. All other business income, from whatever source, would be as fully taxable for businesses as it is for us private citizens.
Corporate persons would get to deduct mortgage interest on their primary homes, like you and I can now. But they would not be able to depreciate the cost of the building itself. We can't, why should they?
Renters can't deduct their rent, so businesses leasing office buildings or factories shouldn't get to deduct their rent either.
We pay for cable TV and entertainment with what's left after taxes, so should they. Same thing with insurance – all insurance: health, life, property, car, liability, you name it.
But that's not fair, you say. Businesses should be able to deduct all the costs of doing business, before Uncle Sam gets any. If that makes sense to you, then why shouldn't you and I be able to deduct all our costs of doing living, regardless of how high on the hog, before Uncle Sam gets any? Or can you really live on that $6,800 a year, which is the combined exemption and deduction the IRS now allows for a single person?
Face it, deductions for business expenses is one of the biggest scams corporations have foisted on working stiffs since the buying and selling of politicians began. Every $1,000 for gold-plated faucets in the executive bathroom means $150 to $300 that the federal coffers never see. Why should those of us on the lower end of the income scale subsidize that extravagance?
If they want gold-plated faucets, fine, but not on my nickel.
Sure, businesses would scream that they couldn't afford to do business under a system like that. But why couldn't they? You and I have to.
Why must every business decision be made with an eye toward its tax consequences? The answer, of course, is that because the way the game is rigged right now, the consequences are huge.
But think of the consequences of really leveling the playing field. If corporations paid income taxes like the rest of us, the impact on the federal budget would be astonishing. In fact, I suspect it would be so astonishing that it would wipe out the national debt (not the annual deficit, I'm talking about the $5+ trillion national debt) in just a matter of years. Plus it would allow Congress to substantially reduce the tax rates for all of us "persons." All this, while still maintaining a functional and productive government providing for the common defense and promoting the general welfare, just like it's supposed to.
The more the tax load is spread out equitably, the less each of us would have to pay on the dollar to fund the federal budget, the less important taxes would become in the business (or individual) decision-making process. Think of all the staff time and paperwork the government would save when the tax code is reduced to a few dozen pages. Corporations would save a bundle by downsizing their accounting and legal departments – not to mention their lobbying firms.
Which is where I came in: If corporations knew they would be treated in the tax code just like real people, the incentive to spend all that money on Washington lobbyists and political campaigns to feed their special interests would simply disappear. That's because there would be no special interests if corporations and real people played by the same set of rules.
You know, maybe the Supreme Court really has something there.
© February, 1998.
This column appeared in the March 11, 1998 Bangor Daily News.
A slightly different version ran in the February 1998 Aroostook (Maine)Democrat
and in the March 1998 Progressive Populist, published in Storm Lake, Iowa.