The latest Q3 US national accounts data shows profits as a share of GDP are at historical highs. Meanwhile household’s share is at all time lows (see chart).

Will pressure from the electorate force to address this imbalance?

In the UK, we witnessed just what SocGen described as “the public lynching of Starbucks, Amazon and Google” as public ire has shifted “very swiftly from banker bashing to corporate bashing.”

Forget the official tax rate, and look at the actual tax dollars US and European companies have been paying.

Societe Generale warns that there is risk to these rates going forward — and that could have implications for profitability.




Quant Quickie
Societe Generale

Category: Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “Why are Cash-Rich Companies Being Subsidized by Tax-Poor Governments?”

  1. gman says:

    Everyone knows… “we have the highest corp. ‘TAX RATES’ in the world”….Repeat!

  2. capitalistic says:

    @gman – Tax rates aren’t the problem, after all, EFFECTIVE TAX RATES is what really counts. You’d be surprised to know the actual effective tax rates of profitable US companies. Just because the blended tax rate is 42%, doesn’t mean they actually pay that.

    Companies just don’t “need” to spend their cash. Low interest rates actually doesn’t incentivize companies to go on a spending spree. How many shiny new fixed assets does a company need? Not only that, but with the growth in leveraged leases, companies can lease vs buy hard assets, thereby reducing their cash outlay and increasing their tax benefits.

    The key indicator for “economic activity” in the US is the growth/decrease in sales/use taxes and property taxes – the two main sources of recurring tax revenue for state govts.

  3. pjschgo says:

    Over the past couple of decades we’ve gone from a labor shortage in this country to a labor surplus (outsourcing, computers, more women working, etc.). As long as there’s a labor surplus there is no incentive to raise wages. Profits (and executive pay) are at all time highs, and labor takes the shaft. But…you know…the last thing we need in this country is the ability for labor to collectively bargain.

  4. Frilton Miedman says:

    Awaiting response from college kid who’d just read “Atlas Shrugged” for the first time, to rant how correlation isn’t causation, that we just haven’t cut taxes enough in 30 years for “trickle down” to truly take affect.

    The globe has become hunting grounds for corporate multinational vultures to pick ‘em clean, this isn’t a trade war between nations, it’s a trade war between nations and corporations.

    Ireland has the lowest corporate rate in the world, among the worst unemployment rates…Dublin is littered with corporate store fronts but nowhere near the job creation to justify those rates.

  5. Concerned Neighbour says:

    Either through corporatocracy, or a fear that a 0.0001% rise in the corporate tax burden will cause every multinational to leave and unhinge this incredibly “robust” market/economy we have going now.

    Fear and blackmail, basically.

  6. peachin says:

    gman – obviously you are of a single concept mind. Take off earnings earned abroad and kept abroad and we have the lowest., Take off fake subsidiaries also. Take off excess compensation – WTFDOYOUKnow?

  7. Moe says:

    On the bottom chart – the two profit colors should be switched – profits after tax should be lower than profits before tax.

  8. Frilton Miedman says:

    peachin Says:
    December 19th, 2012 at 4:13 pm
    ” gman – obviously you are of a single concept mind. Take off earnings earned abroad and kept abroad and we have the lowest. ”


    Gman can correct me if wrong, he was being sarcastic.

  9. changja says:

    Really, public government support and subsidies of private companies need to stop. Its one thing to help provide minimal life support services to the elderly and poor, its another thing to provide extra profits to companies hitting record profits. Why haven’t we heard much about closing more corporate subsidies?

  10. jeffers5 says:

    I’m reluctant to be overtly cynical this time of year, but here goes: One might argue that corporations are the life blood of political fundraising – more so now than ever, given the impact of Citizens United.

    As the referenced “tax-poor government” is the collective will of elected politicians, it stands to reason that government would be generous with respect to corporate welfare. In this light, it’s no surprise to see many corporations that give generously to members of both parties. Do these donations represent a muddled expression of their politics or a clear expression of their desire to buy influence? I suspect it’s the latter. And although I can not reference academic studies that measure the correlation between corporate donations and voting records (particularly in regards to the corporate tax code), I suspect their efforts are effective.

    It seems to me that this is a logical outcome, given how the rules of the game are currently written. A different outcome would require new rules.

  11. VennData says:

    How DARE you punish the successful and reward the failures. This is what the 47% percent is all about.

    If you subtract the 47% from the 1% you’re left a NEGATIVE number. That’s what’s happening to everyone I know. They are negative on America! It’s the end.

    Obama doesn’t need guns, and doesn’t like guns because he’s taxing us to death. The majority of Americans who supported Romney and Boehner and McConnell flying their flags upside down under distress! DISTRESS!

    Do NOT compromise with Obama what ever you do. You can safely ignore the polls that say Americans will blame the GOP. All the Americans I know will blame Obama and we will crush him in the midterms, again.

    Do not give Obama any victories, THAT is what’s important. He must be a two-termer! Send money to:

  12. WFTA says:

    The elderly and poor really need to hire better connected lobbyists.

  13. gman says:

    Yes, sarcasm. Cnbc and the back pages of wsj have destroyed my brain over the past 20 yrs. I try to do to cnbc/wsj what Colbert does to fox.

  14. Frilton Miedman says:

    gman Says:
    December 19th, 2012 at 11:11 pm
    Yes, sarcasm. Cnbc and the back pages of wsj have destroyed my brain over the past 20 yrs. I try to do to cnbc/wsj what Colbert does to fox. ”


    I’m just waiting for someone to lambaste VennData’s “Obama two termer” comment.

  15. BusSchDean says:

    If we increase taxes and let inflation creep up just a bit we will get companies spending cash. Uncertainty can be a great motivator.

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