corporate taxes

Anyway You Slice It Corporate Profits Bigger Share of Economic Pie

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The BEA released corporate profits for Q2 2013 along with GDP.  Corporate profits after tax increased 2.6% from Q1 2014 to $1,830.4 billion.  Corporate profits after tax are also up 5.8% from a year ago.  Corporate profits as a percentage of GDP are at an all time high and after tax profit margins per unit are also soaring to the stratosphere.

Tax Stocking Stuffers for Corporations

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We already know the rich and corporations got quite a haul in the tax bill. USA Today outlines some business tax credits as if the tax breaks under the great giveaway tree aren't enough.

The massive new tax bill signed into law by President Barack Obama is filled with all kinds of holiday stocking stuffers for businesses: tax breaks for producing TV shows, grants for putting up windmills, rum subsidies for Puerto Rico and the Virgin Islands.

There is even a tax break for people who buy race horses.

This is the most outrageous one, a tax break for corporations who invest overseas. Remember all of the rhetoric about banks not funding investment and growth in America, not loaning to businesses? This is the opposite, our Congress just made it pay to create economic growth abroad!

There is a generous tax break for banks and insurance companies that invest overseas, a tax credit for railroad track maintenance, more generous write-offs for upgrading motorsport race tracks,

I kid you not! Here is what this does. It's an exemption that allows banks, insurance companies and other financial firms to shield foreign profits from being taxed by the U.S. through 2011. Cost: $9.2 billion.

A Research Tax Credit Won't Create Jobs

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President Obama is proposing a $100 Billion Research tax credit. The problem is this won't create jobs.

President Barack Obama, focusing on ways to spur economic growth with less than two months to the congressional elections, will urge Congress to permanently extend and expand a research and development tax credit for businesses.

Obama will detail the plan, which would cost about $100 billion over a decade, in an economic speech Sept. 8 in Cleveland, according to two administration officials speaking on condition of anonymity.

Once again, it is manufacturing of scale that is needed. That means curtailing offshore outsourcing, confronting China on their currency manipulation, modifying trade policy and offering tax incentives with strict conditions enforced, that companies manufacture in the United States.

R&D is all well and good. I am in R&D so a tax credit is especially nice for me. But hiring a few researchers in the U.S. is simply not going to generate 7 million jobs, especially when the results of that research, production, will be offshore outsourced to China and India.

Make Corporations Invest in America

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Naked Capitalism's Yves Smith, along with Rob Parenteau, wrote an op-ed in the New York Times. It brings to light corporations are sitting on profits and not reinvesting in their companies and America.

Over the past decade and a half, corporations have been saving more and investing less in their own businesses. A 2005 report from JPMorgan Research noted with concern that, since 2002, American corporations on average ran a net financial surplus of 1.7 percent of the gross domestic product — a drastic change from the previous 40 years, when they had maintained an average deficit of 1.2 percent of G.D.P.

They mention the obsession with quarterly profits as one reason corporations are sitting on wads of cash. Investors are also in part to blame. The minute a quarterly earnings miss or quarterly profits are not bigger than the last, investors pummel and punish a stock.

Also mentioned the reason corporations are sitting on profits and not reinvesting is to pay obscene executive compensation packages.

The point is to create corporate tax code changes to make corporations reinvest those profits back into their companies.

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