Don’t Cry for Corporate America
In an ideal world, it would be nice to streamline, simplify, and even reduce tax and regulatory burdens on US businesses. But business is not the weak link in the US economic chain; workers are, because economic returns have shifted dramatically from the providers of labor to the owners of capital over the past 25 years.
NEW HAVEN – Corporate tax cuts are coming in the United States. While this push pre-dates last November’s presidential election, President Donald Trump’s Make-America-Great-Again mantra has sealed the deal. Beleaguered US businesses, goes the argument, are being squeezed by confiscatory taxes and onerous regulations – strangling corporate earnings and putting unrelenting pressure on capital spending, job creation, and productivity, while sapping America’s competitive vitality. Apparently, the time has come to give businesses a break.
But this argument raises an obvious question: If the problem is so simple, why hasn’t this fix already been tried? The answer is surprising.
For starters, it is a real stretch to bemoan the state of corporate earnings in the US. Commerce Department statistics show that after-tax corporate profits (technically, after-tax profits from current production, adjusted for inventory and depreciation-accounting distortions) stood at a solid 9.7% of national income in the third quarter of 2016.