The notion that corporations are “legal persons” is useful for legal purposes, but terribly misleading when politicians are trying to formulate tax policies:
Pretending that corporations are people leads to tax policies with perverse consequences; some can even produce the opposite of what the policy is intended to do.
[. . .]
Some people want to tax corporations heavily because the corporations are ‘rich.’ But, if corporations are not people, they can’t be rich. The owners or employees of the corporation can be rich, but not an artificial legal entity. As my Economy Lab colleague Stephen Gordon wrote, “Claiming that ‘wealthy corporations’ pay [corporate taxes] makes about as much sense as claiming that ‘rich buildings’ pay property taxes.”
This is not an obscure debate. The owners of corporations do not all wear top hats and monocles like the fellow from the Monopoly game. In reality, Bay Street IPO-mongers quake in fear of two large stockholders. One is the Ontario Teachers Pension Plan. The other is the Canada Pension Plan Investment Board. These two pension plans are the largest holders of corporate equity in Canada, and their stakeholders are broadly middle income. Tax policy that hurts the dividends of Canadian corporations has a direct impact on the vast Canadian middle that hold pensions through these two, and similar, pension entities. Of course, many high-income Canadians also own corporate equities. But, if we desire to change the tax burden on high income individuals, though, it is best to do so directly through the personal income tax rather than taxing things high income people may or may not own.
