In his commentary in The Wall Street Journal in 2010, Michael Boskin went over the disadvantages in levying an income tax on corporations. Within his argument, he observes, “Of course, the corporation is a legal entity; only people pay taxes.”[1] In so doing, he transcended, if only for a moment, his own approach that was oriented simply to giving the pros and cons of corporate taxation. His observation is significant, and it gives us a launching pad of sorts by which we can approach the corporate income tax as a itself as a concept, rather than simply assessing its utility. In short, corporate taxation is an oxymoron if only humans pay tax. In fact, we can conclude from Boskin's remark that the doctrine that corporations are legal persons has been incorrectly construed.
Treating a “legal entity” as if it were a tax-payer is unnatural, and thus gives rise to the double taxation problem. It is interesting that Boskin uses the word “entity,” which is not the same as “person.” That is, to argue that corporations should not be taxed directly, he implies that the legal-person doctrine is not valid (i.e., only humans rightly pay taxes).
I contend that Boskin was correct in referring to corporations as legal entities as distinct from humans in terms of taxation. I submit that he did not go far enough, for it is possible to narrow the legal-person doctrine to mean only that stockholders' personal assets are protected in the event that a corporation has accrued so much in liabilities that they cannot be paid off on time by the corporation. In this case, the term "legal person" should be changed as it would be a misnomer and thus liable to be confused.
In fact, to treat or consider a corporation as a person in any sense is anthropomorphistic. Put another way, an association of human beings does not constitute in itself a person in any sense. To presume otherwise is to make a category mistake between a legal concept and a human being. This error is evident, for example, when someone says, “GM says X.” Only human beings can talk, so it would be better to say that GM's management issued a statement.
Furthermore, an organization cannot be a moral agent. Only the persons in an organization, not the latter itself, have human brains. Only these can entertain the thought denoted by should. Even from merely descriptive thoughts should cannot come, according to David Hume's naturalistic fallacy. Additionally, to make an ethical decision requires cognition that a human brain rather than organizations in themselves have. In fact, organization itself is merely an abstraction. You can not point to GM down the street, for GM is not just its headquarters' building or one of its plants.
Therefore, applying person to an organization can be deemed a category mistake--one that has been enabled by a societal blind-spot.
On business ethics in organizations, see Skip Worden, Cases of Unethical Business: A Malignant Mentality of Mendacity, available at Amazon.
1. Michael Boskin, "Time to Junk the Corporate Tax," The Wall Street Journal, May 6, 2010.
