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 $2.1
trillion during 2013, and paid $419 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.
The
Commerce Department also said total wages and salaries last year
amounted to $7.1 trillion, or 42.5 percent of the entire economy. That
was down from 42.6 percent in 2012 and was lower than in any year
previously measured.
Including the cost of employer-paid benefits, like health insurance and pensions, as well as the employer’s share of Social Security and Medicare
contributions, the total cost of compensation was $8.9 trillion, or
52.7 percent of G.D.P., down from 53 percent in 2012 and the lowest
level since 1948.
Benefits
were a steadily rising cost for employers for many decades, but that
trend seems to have ended. In 2013, the figure was 10.2 percent, the
lowest since 2000.
One
way to look at the current situation is to compare 2013 with 2006, the
last full year before the recession began. Adjusted for inflation,
corporate profits were 28 percent higher, before taxes, last year. But
taxes were down by 21 percent,so after-tax profits were up by 36
percent. At the same time, total employee compensation was up by 5
percent, or less than the 7 percent increase in the working-age
population over the same period.
Several reasons that have been offered as explanations for the declining share of national income going to workers,
including the effects of globalization that have shifted some jobs to
lower-paid overseas workers and the declining bargaining power of
unions.
The accompanying charts compare President Obama’s administration with each
of his predecessors, going back to Herbert Hoover. After-tax corporate
profits in President Obama’s five years in office have averaged 9.3
percent of G.D.P. That is a full two percentage points higher than the
7.2 percent averages under Lyndon B. Johnson and George W. Bush,
previously the presidents with the highest ratios of corporate profits.
The
stock market has reflected that strong performance. Through the end of
March, the Standard & Poor’s 500-stock index was up 133 percent
since Mr. Obama’s inauguration in 2009. Of the 13 presidents since 1929,
only Bill Clinton and Franklin D. Roosevelt saw a larger total
increase. On an annualized basis, the Obama administration gains come to
17.7 percent a year, higher than any of the previous presidents. The
figures reflect price changes, and are not adjusted for dividends or
inflation.
No comments:
Post a Comment