Posts Tagged ‘corporations’

 

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AuchtJ20171208_low  203937

Tax Plan

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Nick Anderson cartoon  download

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If you read the business press in the United States (e.g., the Wall Street Journal), you’ll find something along the lines of the following argument: the fact that U.S. worker productivity rebounded in the third quarter while hourly wages rose moderately is a sign “the economy is strengthening.”

But look at the numbers. Nonfarm business sector productivity (the blue line in the chart above) rose 1.5 percent (from the same quarter a year ago) while real hourly compensation (the green line) fell 1.1 percent.* The result is that unit labor costs (the red line) fell 0.7 percent.

According to Stephen Stanley of Amherst Pierpont Securities,

lighter regulation under the Trump administration and the prospect of a $1.4 trillion tax-cut package being passed by Congress are likely factors that have led companies to boost investment and become more productive.

Corporations may have chosen to boost investment and become more productive—but they have also chosen not to compensate their workers.

The only possible conclusion is that the Trump recovery is a recovery for employers but not for their employees.

Let’s see if Trump or someone in his administration will tweet that!

 

*Hours worked rose 1.5 percent and hourly compensation only 0.8 percent in the third quarter. As a result, real hourly compensation was -1.1 percent.

corp taxes

One of the rationales for the great Republican tax heist of 2017 is that American corporations desperately need tax relief.

However, as is clear from the chart above, the current corporate tax rate is already very low—not absolutely (since it was in fact lower in 2009, when corporate profits fell during the Great Recession), but certainly in comparison to the rest of the postwar period.*

Today, the effective corporate tax rate in the United States is only 20.4 percent, lower almost by half than the much-ballyhooed statutory rate of 38.91 rate and less than half of what it was in the mid-1980s.

One can only imagine, then, how low the effective rate will be if and when the statutory rate is reduced according to the tax bills passed through the U.S. House of Representatives and the Senate. They both cut it to 20 percent, on a permanent basis—which is the biggest one-time drop in the business tax rate ever.

 

*The effective corporate tax rate is defined here as the percentage difference between corporate profits before and after tax (both calculated without IVA and CCAdj adjustments), according to statistics from the U.S. Bureau of Economic Analysis.

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112817ChipBok_Creators  112817DanWasserman_Tribune

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HelleJ20171128_low  Clay Bennett editorial cartoon

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StiglT20171122_low  cjones11252017