Corporate Profits Grow and Wages Slide (original) (raw)
Economy|Corporate Profits Grow and Wages Slide
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- April 4, 2014
CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years.
The Commerce Department last week estimated that corporations earned 2.1trillionduring2013,andpaid2.1 trillion during 2013, and paid 2.1trillionduring2013,andpaid419 billion in corporate taxes. The after-tax profit of $1.7 trillion amounted to 10 percent of gross domestic product during the year, the first full year it has been that high. In 2012, it was 9.7 percent, itself a record.
Until 2010, the highest level of after-tax profits ever recorded was 9.1 percent, in 1929, the first year that the government began calculating the number.
Before taxes, corporate profits accounted for 12.5 percent of the total economy, tying the previous record that was set in 1942, when World War II pushed up profits for many companies. But in 1942, most of those profits were taxed away. The effective corporate tax rate was nearly 55 percent, in sharp contrast to last year’s figure of under 20 percent.
The trend of higher profits and lower effective taxes has been gaining strength for years, but really picked up after the Great Recession temporarily depressed profits in 2009. The effective rate has been below 20 percent in three of the last five years. Before 2009, the rate had not been that low since 1931.
The statutory top corporate tax rate in the United States is 35 percent, and corporations have been vigorously lobbying to reduce that, saying it puts them at a competitive disadvantage against companies based in other countries, where rates are lower. But there are myriad tax credits, deductions and preferences available, particularly to multinational companies, and the result is that effective tax rates have fallen for many companies.
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