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Corporations Do Pay Income Taxes

June 16, 1985

Regarding "Tax Reform May End Up as Tax Cut" (Times Board of Economists, June 4), columnist Don R. Conlan says that the idea that corporations should pay taxes is "one of the most specious of traditional left-wing ideas."

"Sorry, folks," he says, "corporations do not pay taxes--only people pay taxes. Corporations are a conduit, nothing more, nothing less."

But it is Conlan who is being specious here. By legal definition, a corporation is a "person"--a fictitious person, true, but a person nonetheless as far as the law is concerned.

It has independent existence of its owners, the shareholders, as well as existence in perpetuity, outside of the life span of any individual shareholder. It is precisely its "personhood" that allows the corporation to take on liabilities and allows its owners limited liability.

Is Conlan suggesting that the stockholders of corporations should enjoy the benefits of the corporate status (untaxed corporate profits) and also enjoy limited liability, i.e., not be responsible for the corporation's losses beyond their own individual investments?

Or, is he suggesting that the concept of limited liability be done away with--which would have to be the case if the corporation's "personhood" were consistently done away with? I suspect the former. But in that case, Conlan should simply say so.

The essence of Conlan's argument is that taxing a corporation leads to higher corporate costs, which lead to ("all things being equal") higher prices, passed on to the consumer. But this is true of any cost of doing business--wages, investments in safety, etc. "Corporations don't pay wages--only people pay wages."

This is just as true as Conlan's statement about taxes--and is, in fact, a standard argument of employers attempting to justify paying low wages to their employees. They're "protecting" the consumer by increasing their own profits. Such solicitousness on behalf of consumers is touching, but unconvincing.


Culver City

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