Tag: citizens united

‘Corporations Are [Made of] People’

Mitt Romney’s explanation of why he’s against raising taxes on corporations — indeed, America already has some of the highest corporate tax rates in the developed world — at the Iowa State Fair was a bit awkward but not wholly incorrect.  Reason’s Katherine Mangu-Ward has a good post with video and transcript, but here’s the salient bit:

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: [LAUGHTER]

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. So number one, you can raise taxes. That’s not the approach that I would take.

Now, obviously, Romney is not saying that corporations are living, breathing beings with rights to abortion (or not, or depending on the stage of development of the fetal/baby corporations) and marriage, who are subject to Obamacare’s individual mandate (or even Romneycare’s for Massachusetts corporations), can be put to death if they murder someone, and so forth.  He means that corporate money always comes from, flows through, and ends up in human hands.  It cannot be otherwise: we are the only beings/entities/”things” on the planet that deal in money.  Not even the honey badger does that.

I probably would’ve phrased it differently — Democrats and left-wing activists are already having a field day (for example, mixing Romney’s speech with Barbra Streisand’s singing “People”) — but there’s really nothing wrong with Romney’s point.  Indeed, it’s the tax-policy corollary to the legal point I’ve been making ever since Citizens United came down: corporations don’t have constitutional rights because they’re corporations, but because they’re made up of individuals, who don’t lose their rights when they associate (in corporate form or otherwise).

As I said in a previous blogpost, “it really doesn’t matter that ‘corporations aren’t people.’  Of course they’re not living, breathing human beings, and their ’personhood’ for legal purposes is just that: a convenient legal fiction.”  I even wrote a law review article (co-authored with Caitlyn Walsh McCarthy) to explain this fairly simple argument.  From the abstract:

When individuals pool their resources and speak under the legal fiction of a corporation, they do not lose their rights. It cannot be any other way; in a world where corporations are not entitled to constitutional protections, the police would be free to storm office buildings and seize computers or documents. The mayor of New York City could exercise eminent domain over Rockefeller Center by fiat and without compensation if he decides he’d like to move his office there. Moreover, the government would be able to censor all corporate speech, including that of so-called media corporations. In short, rights-bearing individuals do not forfeit those rights when they associate in groups.

Similarly, when you tax corporations, you’re taxing the people who ultimately profit from corporate activity: officers, directors, and, most directly, shareholders.  Of course, all these people also pay individual income taxes so, in effect, that income is being taxed twice.   I’ll leave it to my colleague Dan Mitchell to explain why that might be bad and how otherwise to reform our tax code, but the fact of the matter is that raising corporate taxes does in fact constitute raising taxes on people — which you have to be against if you want to become the Republican presidential nominee.  That’s why Romney said what he said.

Anyhow, the title of my article is “So What If Corporations Aren’t People?” but perhaps I should retitle it “So What If Corporations Are People?” and offer it as a press release to the Romney campaign.

The First in a Long Series

The Washington Post offers today a critical look at independent fundraising and spending in the 2012 campaign.

The article states independent groups are raising money “in response to court decisions that have tossed out many of the old rules governing federal elections, including a century-old ban on political spending by corporations.”

But the century-old ban is on campaign contributions by corporations, and it is intact. Spending on elections was not prohibited to some corporations until much later.

Other spending by corporations, like the money spent by The Washington Post Company to produce the linked story, has never been regulated or prohibited by the federal government.

The article mentions a “shadow campaign” and refers to Watergate. It states “independent groups are poised to spend more money than ever to sway federal elections.” Surely something is amiss here! Or at least the causal reader of the Post might conclude that.

But what is going on? A spokesman for one of the independent groups says they are trying to influence the debt ceiling debate and that as far 2012 goes: “We’re definitely working to shape how the president is perceived, because how he is perceived will have a huge impact on how this issue is resolved.”

It sounds like the group is engaging in political speech on an issue, speech that could have some effect on next year’s election. What is amiss about that? Isn’t the right to engage in such speech a core political right under our Constitution?

The article also argues that independent groups, being independent, may fund speech that may harm a candidate they are trying to help. Candidates, in a sense, have lost some control over their campaigns and their messages.

Of course, absent limits on contributions to candidates and parties, the money going to independent groups might go to…candidates and parties. Liberalizing speech, not suppressing independent groups, might be a good way to prevent groups from airing ads that harm or misrepresent candidates for office. Finally, candidates do have the power to repudiate independent ads.

Expect more news stories like this one over the next 18 months. The cause of campaign finance reform is in desperate straits. Reformers in the media are going to construct a narrative that says: money is destroying democracy in 2012, all because of Citizens United. They hope thereby to set the stage to restore restrictions on campaign finance.

So What If Corporations Aren’t People?

As Julian Sanchez detailed yesterday, those who complain about fewer restrictions on corporate political speech but celebrate the freeing of restrictions on corporate videogame speech are in a bit of a logical pretzel.  But ultimately both those who think corporations have speech rights and those who don’t miss the larger point: it’s not about corporate rights but the rights of the individuals who freely associate and thus pool their speech via the corporate legal form.

That is, it really doesn’t matter that “corporations aren’t people.”  Of course they’re not living, breathing human beings, and their ”personhood” for legal purposes is just that: a convenient legal fiction.

To elaborate on these ideas, Cato legal associate Caitlyn Walsh McCarthy and I have  written a law review article titled “So What If Corporations Aren’t People?”  Here’s the abstract:

Corporate participation in public discourse has long been a controversial issue, one that was reignited by the Supreme Court’s decision in Citizens United v. FEC, 130 S. Ct. 876 (2010). Much of the criticism of Citizens United stems from the claim that the Constitution does not protect corporations because they are not “real” people. While it’s true that corporations aren’t human beings, that truism is constitutionally irrelevant because corporations are formed by individuals as a means of exercising their constitutionally protected rights. When individuals pool their resources and speak under the legal fiction of a corporation, they do not lose their rights. It cannot be any other way; in a world where corporations are not entitled to constitutional protections, the police would be free to storm office buildings and seize computers or documents. The mayor of New York City could exercise eminent domain over Rockefeller Center by fiat and without compensation if he decides he’d like to move his office there. Moreover, the government would be able to censor all corporate speech, including that of so-called media corporations. In short, rights-bearing individuals do not forfeit those rights when they associate in groups. This essay will demonstrate why the common argument that corporations lack rights because they aren’t people demonstrates a fundamental misunderstanding of both the nature of corporations and the First Amendment.

This article is still being edited – it won’t appear in the John Marshall Law Review till the fall – so comments are welcome.  Thanks to Eugene Volokh for making suggestions on an earlier version.

Update: Larry Solum has “recommended” our article on the Legal Theory Blog.  Thanks!

Are Corporations People When They Make Video Games?

I note that I’m not hearing many critics of Citizens United decrying yesterday’s very welcome Supreme Court ruling, in which the majority held unconstitutional a California statute prohibiting the sale or rental of violent video games to minors. Perhaps that’s just because they’re concerned with corporate influence on elections as a policy matter, and not so much about Grand Theft Auto, but as a matter of First Amendment interpretation, it seems as though the elements that supposedly made Citizens United a travesty are present here.

As the conservative Justice Alito notes in dissent, for example, the statute at issue here does not prohibit anyone from creating, possessing, freely loaning, or playing violent video games: It regulates only their rental and sale. In other words: Money isn’t speech! The majority opinion—authored by Scalia, but joined by the Court’s most liberal justices—roundly rejects the relevance of that distinction, which “would make permissible the prohibition of printing or selling books—though not the writing of them. Whether government regulation applies to creating, distributing, or consuming speech makes no difference.” While, of course, money isn’t speech, the majority here understands that when the effect and purpose of a regulation is to restrict expression, the First Amendment is not some hollow formalism, and also limits regulation that functions by targeting enabling transactions rather than the speech directly.

None of the justices seem to make much of the obvious fact that the great majority of popular video games—and probably just about all of the ones exhibiting the level of graphical sophistication and realism at issue here—are produced, marketed, and sold by (uh oh) corporations. In fact, the passage quoted above focuses entirely on acts (“creating, distributing, or consuming”) rather than particular actors, just as the First Amendment itself prohibits government interference with speech not with this or that type of speaker. The Court simply observes that because the statute “imposes a restriction on the content of protected speech, it is invalid unless California can demonstrate that it passes strict scrutiny.” In dissent, Justice Thomas argues that the games are not “protected speech” in the context of the statute, because the Founders would have considered all speech directed at minors unprotected (a premise whose chilling implications the majority is quick to point out). Justice Breyer allows that video games—including violent ones—are indeed “protected speech,” but argues that studies linking them to violence are enough to give the state a “compelling interest” in limiting their dissemination. What nobody suggests, even in passing, is that video games might cease to be “protected speech” if the statute were limited to games manufactured and sold by corporations—which, in practice, is pretty much all the games we’re talking about.

Someone who welcomed this decision as a victory for free speech, but nevertheless supports regulation of independent political expenditures, can always take Breyer’s route: Maybe God of War III is not really harmful enough to make its prohibition a compelling state interest, but the degradation of democracy by corporate influence is a serious enough problem that its regulation survives “strict scrutiny,” overriding ordinary First Amendment protection even in the domain of political speech normally regarded as its core. That is not a position I find plausible, but it is at least coherent. The position I doubt can be made coherent is one according to which a prohibition of a commercial transaction instrumental to corporate-produced speech (and intended precisely to curtail that speech) should not even trigger First Amendment protections when the speech expresses a political opinion, whereas the same prohibition is unconstitutional if the speech is about Kratos impaling a minotaur on his Blades of Chaos. Though if that’s the form political expression has to take to enjoy constitutional protection, I look forward to the impending release of Palinfamous 2 and Barack Band III.

What Did Orwell Say?

Steve Simpson and Paul Sherman of the Institute for Justice have written an excellent short essay about Stephen Colbert’s effort to undermine the Citizens United decision. But the joke is on Colbert:

Campaign-finance laws are so complicated that few can navigate them successfully and speak during elections—which is what the First Amendment is supposed to protect. As the Supreme Court noted in Citizens United, federal laws have created “71 distinct entities” that “are subject to different rules for 33 different types of political speech.” The FEC has adopted 568 pages of regulations and thousands of pages of explanations and opinions on what the laws mean. “Legalese” doesn’t begin to describe this mess.

So what is someone who wants to speak during elections to do? If you’re Stephen Colbert, the answer is to instruct high-priced attorneys to plead your case with the FEC: Last Friday, he filed a formal request with the FEC for a “media exemption” that would allow him to publicize his Super PAC on air without creating legal headaches for Viacom.

How’s that for a punch line? Rich and successful television personality needs powerful corporate lawyers to convince the FEC to allow him to continue making fun of the Supreme Court. Hilarious.

Of course, there’s nothing new about the argument Mr. Colbert’s lawyers are making to the FEC. Media companies’ exemption from campaign-finance laws has existed for decades. That was part of the Supreme Court’s point in Citizens United: Media corporations are allowed to spend lots of money on campaign speech, so why not other corporations?

Because some animals are more equal than other animals, I suppose.

When Should Courts Overturn Precedent?

Cato legal associate Nick Mosvick and I explain that Citizens United overturned one 20-year-old court decision in the name of restoring an older tradition upholding First Amendment rights, in a new article about to be published in the (Chapman University Law School) Nexus Journal of Law & Public Policy

Here’s the abstract:

Stare decisis is an important doctrine with deep roots in the common law. It “promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.” Payne v. Tennessee, 501 U.S. 808, 827 (1991). Indeed, our interest in the law’s stability and predictability, and the reliance interests produced by judicial decisions, sometimes dictate that incorrect legal rulings be maintained — because the social disruptions from correction outweigh the benefits of reaching better decisions.

Still, stare decisis is neither an “inexorable command,” Lawrence v. Texas, 539 U.S. 558, 577 (2003), nor a “mechanical formula of adherence to the latest decision,” Helvering v. Hallock, 309 U.S. 106, 119 (1940). Instead it is a prudential policy, one in which courts have to decide, based on factors such as the correctness, antiquity, and workability of the legal regime a precedent created, whether to overturn their earlier rulings. As Chief Justice Roberts put it in his Citizens United concurrence, “abrogating the errant precedent, rather than reaffirming or extending it, might better preserve the law’s coherence and curtail the precedent’s disruptive effects.” 130 S. Ct. 876, 921 (2010) (Roberts, C.J., concurring).

And so the Court in Citizens United found that both Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), and the part of McConnell v. FEC, 540 U.S. 93 (2003), that relied on it were not worthy of preservation. They created an arbitrary and increasingly irrational campaign finance system that was an aberration of restrictions in a sea of protections for political speech.

Moreover, then-Solicitor General Elena Kagan abandoned Austin’s speech-equality rationale during oral argument, undercutting any possible reliance interests. Only by overturning precedent could the Court contribute to the stable and orderly development of the law. This article will explain the role stare decisis played in Citizens United and build on the Chief Justice’s concurrence to describe the current state of the doctrine.

Thanks to Larry Solum for featuring us on his Legal Theory Blog.

Citizens United Turns One

The Supreme Court majority in Citizens United asserted plainly that the federal government’s powers are few and defined in the realm of political speech. The decision has since been cast as one that does little more than give “corporations and unions the freedom to spend as much as they like to support or attack candidates.” Of course, the stakes were far higher. As the government’s attorney asserted during the initial oral argument, the Federal Election Commission retained the authority to ban the sale of certain books (e-books included) in the weeks leading up to an election, a fact opponents of Citizens United rarely mention.

Shortly after that oral argument, Austin Bragg and I made a short video with Steve Simpson of the Institute for Justice, Allison Hayward of George Mason University School of Law (and now of the Center for Competitive Politics) and John Samples, director of the Center for Representative Government at the Cato Institute.