18 November 2011

Trends in corporate taxation

Data from the Federal Reserve Bank of St. Louis, via Slate.
The percentage of corporate profit (after taxes) paid as income tax has been on a steady downward trend since the 1950s. In the last year or so, it has rebounded a trifle since hitting its all-time low during the Great Recession, but still sits comfortably below any other point in the last six decades. It might be worth remembering that the 1950s were a decade in which “more people joined the middle class than at any time in history.” And yet, one of the great stumbling blocks preventing the “supercommittee” from hammering a long-term deficit reduction deal is the GOP fixation on the premise that taxes on American corporations are too high. 
(It was pointed out to me yesterday on a different post that as low as current tax rates are, they were even lower (absent) in the nineteenth century and before.


  1. Since corporations don't wear pants, whose pocket does the corporate income tax come out of?

  2. Surly Handyman: "There's yer problem"

  3. "The percentage of corporate profit (after taxes) paid as income tax has been on a steady downward trend since the 1950s."

    I don't understand the "after taxes" in the parenthesis. This seems to indicate that the chart is showing the percentage of corporate profits that are taxed after the corporation has already paid tax. I don't get it. :/

  4. The way I read it, the (after taxes) modifies the word "profit", not the word "paid."

    So if a company makes $100 profit, then pays $25 taxes on that profit, they would be paying 25 tax on 75 after-tax profit, or 33% (0.33).

  5. It would be interesting to overlay this chart with red and blue, indicating which party was in power at each time corporate taxes went down.

  6. Hmm.. doesn't it look a bit strange that federal taxes were over 80% of corporate profits in the 1950s?

    According to the IRS, the total federal corporate tax rate was only about 42-51%


  7. Not strange at all, Wales.

    You need to read my previous explanatory comment. The graph shows tax as percentage of AFTER-TAX profit.

    Take the middle of the figures you offer (46%).

    Corporation with $100 profit. Taxes $46. After-tax profit $54. Tax as percent of after-tax profit 46/54 = 85%.


  8. This in no way takes into account the relative tax structures of other countries, where our corporations compete. Therefore, it's utterly useless as guide to what a proper tax structure should be.

    Understand this simple premise - corporations do not pay taxes, people pay taxes. Raising the tax rate on a company generally means you're raising the price of their products. Raising prices on products made here makes foreign products more attractive, driving more Americans out of work. Raising tariffs to compensate, just lowers the relative buying power of individuals, which strikes the lower income classes the hardest.
    Until you understand economics, you can't understand politics. The Left in this country (perhaps unconciously, if I'm being generous) works toward a lower standard of living so voters are more dependent on government for their well being. Reliance on government means you vote for those who promise you the most from federal coffers.
    And so the USA becomes like Europe - a bankrupt, hollow shell, at the mercy of its debtors, held together only by its interdependent subsidies. It's not speculation, it's happening there RIGHT NOW.

    Such ignorance can only end badly for us.

  9. Until you understand economics, you can't understand politics.

    Nothing in your post suggests an "understanding of economics", or recent history for that matter. It suggests a certain aptitude for incoherent ranting though, I'll grant you that.


Related Posts Plugin for WordPress, Blogger...