Corporations are anything but “creatures of the state”

Bill Clinton recently said that in law school they’re taught that corporations are creatures of the state.

If that’s what they teach in law school, get your tuition money back.

To be a creature of the state means that you’re created by the state. The only corporations that are creatures of the state are companies like Fannie Mae and Freddie Mac, which were in fact set up by the state.

As for almost all other corporations, in most cases they got their start in someone’s garage or basement or home office and grew from there. They are creatures of the private-sector person or persons who started them. They weren’t set up by the state or by any government official in any way.

To be sure, the state can create a good climate for corporations, such as transportation infrastructure and enforcement of contracts, but all too often it also throws up obstacles along the way, like over-regulation, over-litigation, and excessive taxation.

Note to Bill Clinton and to law schools: with a very few exceptions, corporations are not creatures of (i.e. created by) the state in any way.






























All (Revenue-Generating) Corporations Pay Taxes

The other day I heard TV and newspaper commentator Juan Williams complain that half of all corporations don’t pay taxes, a refrain that I’m sure is common among the left.

Sounds ominous, but actually it’s not. A very large percentage of corporations (I don’t have the exact percentage) are S-corps, or Subchapter S corporations, also known as pass-through entities. They don’t pay any corporate taxes at all. Instead, the earnings (if there are any) are passed through to the owner(s), and the owner pays income and/or payroll taxes on those earnings.

C-corporations pay taxes on earnings before they’re passed through to the owner. But lots of those don’t pay corporate taxes because they don’t have earnings – i.e. their expenses exceed their revenues.

And even if S and C corporations don’t pay corporate taxes, if they have employees, they pay a lot of payroll taxes – the employees pay half of the Social Security and Medicare taxes, and the corporation pays the other half. There are tons of other types of taxes they pay as well, such as unemployment taxes and various state and local taxes.

What’s a corporation? A building with lots of office furniture, computers, and equipment inside? Can a building pay a tax? Does a corporation experience consciousness? Can it feel pain? Does it have feelings?

A corporation is another word for a group of people working together. All of those people pay taxes (unless you’re the owner and you’re losing money).

So no, Juan, you’re wrong in your allegation that half of corporations don’t pay taxes. Corporations are groups of people (or even just one person, if it’s a single-member corporation), and assuming all of those people get income from their work, then all corporations pay taxes.