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Corporate Profits - 4/15/14

The U.S. Commerce Department recently reported that corporations collectively earned $2.1 trillion in 2013 and paid $419 billion in corporate taxes.  The after tax profit of $1.7 trillion amounted to about 10 percent of last year’s gross domestic product, the first full year that it has been that high.  In 2012, corporate profits’ share of gross domestic product was 9.7 percent, itself a record. 

According to writer Floyd Norris, until 2010, the highest level of after tax profits ever recorded was 9.1 percent in 1929, which was the first year that the government began calculating the number.  Before taxes, corporate profits accounted for 12.5 percent of total economic output, which tied the previous record established in 1942 when World War II pushed profits higher at many companies. 

The difference that in 1942 most of these profits were taxed away.  Back then, the effective corporate tax rate was nearly 55 percent.  Last year’s figure was a bit under 20 percent.  Meanwhile, the Commerce Department also reported that total wages and salaries last year amounted to $7.1 trillion, or 42.5 percent of the economy.  That was down from 42.6 percent in 2012 and was lower than in any previously measured year.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.