Last year was another record year for corporate America. New numbers published today show they made a record after-tax profit of $1.68 trillion:
Or perhaps you would prefer this result expressed as a share of the total national income of the United States? Yes, still a record.
This is not a surprise: since the recession, weak labor markets and reduced costs have allowed companies to maximize their income in the United States; the increasing impact of global sales (and the possibility of indefinitely deferring taxes on their profits there) increased net income; and low interest rates have made borrowing cheap for corporate debt issuers. What can we learn from this?
There is no stock market bubble, for the moment.
Sure, valuations are high, but that’s partly because earnings are so high. This situation won’t last forever, but if corporate earnings are higher than they’ve ever been, it makes sense that the stock market is also approaching record highs. See these tables for more information.
Corporate tax reform is not for tomorrow.
For US politicians, tax reform would take the form of closing tax loopholes to reduce headline rates. But U.S. businesses enjoy some of the lowest effective tax rates thanks to these reliefs, and companies are in no rush to change that.
Labor always loses.
We disappointed you on Labor Day by telling you that American workers’ share of national income was the lowest since World War II, and it’s further confirmation that corporations don’t need to big waves of hiring to stay in the dark. As the labor market gradually tightens, there is no doubt that workers are at a disadvantage.