Corporations, Democracy, and the U. S. Supreme Court
Mason Gaffney, February 24, 2010
On Jan 21 2010 our High Court shocked Americans by ruling in
Citizens United v. Federal
that a corporation may contribute unlimited funds advertising its views for
and against political candidates of its choice – in practice, the choice of its CEO or Directors.
The ideas behind this are that a corporation is a “legal person”, with all the rights (if not all the
duties) of a human being; that as such it has a right of free speech; and that donating money is a
form of speech. Already K&L Gates, a top Washington lobbying firm, is advising its clients how
to funnel money through lobbying groups or “trade associations”. This culminates a long series
of actions and reactions (decisions, legislative acts, and electoral results) that bit by bit have
raised the power of corporations in American economic and public life. Herein I will take the fall
of the corporate income tax as a simple metric of the power of corporations. Nothing about
corporations is that simple, however, so I must also touch on other aspects of power.
Some critics react apocalyptically, calling
a death blow to democracy; some
cynically, calling this merely making
what is already
; some legalistically, saying
the Court ruled more broadly than justified by the case brought before it. Supporters, naturally,
take this contentedly as righting an injustice of long standing. Some economists would applaud
this as a step toward sunsetting the corporate income tax, by electing more candidates beholden
to corporate money. Many of them – not all – have been seeking this end for years in their
learned journals and op-eds. Even the late Wm Vickrey, otherwise an egalitarian, gave high
priority to this change.
This writer does not applaud either sunsetting the tax, or this step. I agree with Joseph Stiglitz
that the corporate income tax is mainly a tax on economic rent. That means that a high tax rate
does not destroy the tax base. Martin Feldstein, an economist who is as conservative as Stiglitz is
liberal, also sees the corporate income tax as a tax on economic rent (JPE 85(2); April 1977, p.
357). It is not the ideal form of such a tax, but it beats any tax on work, or sales of the necessities
of the poor, or value-added, or gross sales. Both Vickrey and Stiglitz rate high in the profession
and garnered Nobels, so we cannot simply appeal to “authorities”. To prepare our minds, let us
review some milestones in the history of corporations, especially in America.
This is not a paper on the theory of tax incidence. Such a paper is needed, but would take a
heavy tome, most of it devoted to fine-spun and pretentious theories that appear in academic
journals, and which fail to convince because the authors are weak on distinguishing land from
capital. My own postulates here, in brief, are 1) that corporations own a large fraction of the
wealth in the country; 2) much of that wealth is land; 3) taxes that do fall on capital are in part