Home > Economics > Asking whether ‘corporations are people’ is not a helpful question. Part 2: campaign finance

Asking whether ‘corporations are people’ is not a helpful question. Part 2: campaign finance

December 12, 2011 Leave a comment Go to comments

ROMNEY: We have to make sure that the promises we make — and Social Security, Medicaid, and Medicare — are promises we can keep. And there are various ways of doing that. One is, we could raise taxes on people.

AUDIENCE MEMBER: Corporations!

ROMNEY: Corporations are people, my friend. We can raise taxes on —

AUDIENCE MEMBER: No, they’re not!

ROMNEY: Of course they are. Everything corporations earn also goes to people.

AUDIENCE: [laughs]

ROMNEY: Where do you think it goes?

AUDIENCE MEMBER: It goes into their pockets!

ROMNEY: Whose pockets? Whose pockets? People’s pockets! Human beings, my friend.

(H/T Brad Plumer)


In my previous post, I argued that Romney was right – corporations don’t pay corporation tax, people pay corporation tax and we’re not quite sure which people and how much. Conservatives are somewhat fond of pointing this out. But I haven’t seen anyone pointing out that it is also not all that meaningful to say that if corporations are allowed to donate to political campaigns, those donations are paid for by corporations. People pay for corporate donations for political campaigns, just as people pay corporation tax. I think it is worth thinking through the implications of this.


A bit of background

In 1972, the Federal Election Campaign Act was signed into law,  which as well as limited the dollar value of individual’s contributions to political campaigns introduced a long and complicated list of regulations that I frankly don’t really understand (and has been frequently amended, often in response to court challenges) about who can and cannot spend on various things related to elections. In a decision that was widely derided by American progressives, Citizens United vs. FEC , the Supreme Court ruled unconstitutional provisions of the Bipartisan Campaign Reform Act which restricted the ability of corporations (or unions) to broadcast “electoral communications”*. What I had not realised until yesterday when I stumbled across an article by my friend Tom Eland (then working for Americans for Campaign Reform. Full disclosure: I am acquainted with John Rauh, the founder and current CEO) is that there has more recently been a lower court decision, United States v. William Danielczyk Jr. & Eugene Biagi, where it was held that Virginian corporations could not be prohibited from reimbursing donations made by employees to political candidates. I have no legal expertise and don’t know what the legal ramifications of this will be over the next few years, but it strikes me that there is at least a possibility it will be upheld in the higher courts, and that within 2-3 election cycles in the US we could have corporations being permitted to donate directly to political candidates (with contribution limits on a per-candidate basis, like there are for individuals).


Corporate donations are paid for by people

Just like corporations taxes, the cost of the campaign contributions made by corporations is paid for by someone. I want to argue that insofar as it is deemed necessary to limit individual donations to political campaigns, then we should deduct donations ‘paid for’ by them through corporations from that individual allowance. Now, I happen to think that corporations should be allowed to make political donations, but I think this precisely because corporations are made up of individuals. There is nothing wrong with people pooling together their resources to do this, be that within the context of a profit or a non-profit. But  the ability to channel donations through a corporations should not increase the amount that an individual can effectively spend. You should be allowed to donate as an individual or through a corporation, but it is precisely because corporations are made up of persons that there should not be a separate limit.

When we talk about ‘corporate’ influence in politics, we are talking about the influence of persons. Limits on political donations by individuals should apply no matter the channel by which that money is donated. If you work for, say, Goldman Sachs, you should absolutely be free to contribute and vote for politicians who will do things that are good for Goldman Sachs (although you are morally obligated to vote for the common good, if you vote at all and the same applies to all political advocacy). But working for Goldman Sachs should not increase the amount you can legally donate. Being part of (or contributing to) a corporation effectively gives you that ability, if corporate donations are allowed.

Now, obviously it is not possible to tell (especially in the case of for-profit businesses) who really ‘paid’ for a corporate campaign contribution. That is a problem. There are also all kinds of problems with figuring out what speech is or is not ‘political’, or which does or does not ‘affect’ the outcome of elections. But it doesn’t change the fact that we chose to limit the amount that individuals are allowed to give to a candidate and spend on some kinds of advocacy. Conceptually speaking, whatever the right limit is should apply both to donations directly from them and those made through corporations which they effectively paid for.

Romney correctly points out that corporation taxes come out of the pockets of people. We should also wake up to the implication that corporate donations also come out of the pockets of people, and that is precisely the problem with them. It makes individual limits on donations meaningless, unless you deduct the corporate donations effectively paid for by those same individuals. The relevant limit (whatever it is) is at the level of the individual. If we could come up with a way for making the deduction from an individual’s personal ‘allowance’, I’d be perfectly fine with letting corporations be conduits for political donations.

But we haven’t, and it might not even be possible to do so. And so I am completely not OK with that happening.



*The decision in question was with regards to the distribution of a film about Hillary Clinton made by Citizens United, a conservative non-profit organisation

Categories: Economics
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  1. April 12, 2012 at 10:36 am

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