Here's the entire exchange, as per the Washington Post:
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.
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.
At a top level, Romney is right: corporations have been long treated by courts as independent "people", able to enter into contracts, commit torts, and -- perhaps, most important -- shield their investors from personal liability.
That's consistent with the Citizens United court's finding that corporations are entities that are subject to First Amendment protections: to paraphrase Romney's words, "Corps are people, too."(*)
(* - Robert Clark's seminal treatise, Corporate Law, declares that "One of the law's most economically significant contributions to business life, and one often ignored by lawyers because it generally generates less litigation than many other contributions, has been the creation of the fictional but legallly recognized entities or "persons" that are treated as having some of the attributes of normal persons." Sec. 1.2.3)
But read Romney's words again. He's actually not arguing that corporations are people, the way Dean Clark and the Citizens United court does.
Rather, he's arguing that corporations are made up of people. Every dollar that a corporation earns in profit is eventually paid to a real person, who owes taxes on that profit. And accordingly, Romney argues, corporation taxes should be reduced.
(We will put aside the political wisdom of Romney -- who's being painted as Mr. Corporation in the GOP primary, at least by Tim Pawlenty -- defending lower corporate tax rates.)
But under Romney's vision, corporations are little more than unincorporated associations: partnerships, if you will, who just happen to have stock tickers.
But if corporations are just the collection of people whom comprise them (i.e., stockholders), why should we grant them status as "legal persons"?
And why should the corporate shield on liability (the shield that kept Mr. Romney, and the rest of Bain Capital from suffering ill-effects from the bankruptcy of Ampad) be recognized?
To quote a different Supreme Court (albeit minority) opinion: "Taxes are what we pay for civilized society"