Weekly Economic Snapshot 3/27 - 3/31

Economic Facts for this Week

• From 2008 to 2015, 258 Fortune 500 corporations that consistently netted profits paid an average effective tax rate of just 21.2 percent. One hundred of these corporations paid no federal taxes or even claimed a rebate in at least one year from 2008-2015; of corporations that had substantial overseas profits, most paid higher tax rates to foreign governments than to the United States.
• Ten corporations are responsible for almost 40 percent of the untaxed corporate profits held offshore, with just four accounting for 25 percent of untaxed offshore profits.
• Corporate accounting tricks that make profits earned in the United States look like profits earned offshore—so-called “income shifting”—are estimated to cost more than $100 billion per year in tax revenues.

Chart of the Week:

While many complain that high corporate tax rates are obstructing stronger U.S. economic growth, the reality is that corporate profits are strong and corporate taxes are exceedingly low. In 2016 corporations paid taxes amounting to 1.6 percent of GDP, far below the 5.9 percent of GDP corporations paid in 1952. Corporate profits after taxes, on the other hand, grew to nearly 9 percent of GDP in 2015 (the last year for which data are available), up from just 6 percent in 1952. In other words, after-tax profits as a share of GDP are up almost 50 percent while tax revenues from corporate profits as a share of GDP are down 73 percent.

ICYMI

• Anne Case and Angus Deaton released new work showing that falling life expectancy for white non-Hispanic Americans is driven by whites without a college degree. For whites with a college degree, life expectancy continues to rise. They find that this is perhaps due to “cumulative disadvantage” from worsening labor market conditions and the subsequent effects on marriage outcomes and health, rather than due to stagnant or declining incomes.
• The unemployment rate is about 0.3 to 0.4 percentage point higher than it was at past labor market peaks, after adjusting for demographic changes in the labor market. This analysis suggests that the labor market is still not at full employment—despite the Federal Reserve’s recent decisions to raise interest rates.

Coming This Week

• Thursday 8:30am: Gross Domestic Product, 4th quarter and annual 2016 (third estimate); Corporate Profits, 4th quarter and annual 2016 – https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
• Friday 8:30am: Personal Income and Outlays, February 2017 (including the Federal Reserve’s preferred measure of inflation) – https://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm