Posted by Joseph Y. Calhoun, III

Alan Reynolds at Cato found this in the 1st quarter GDP report:

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $42.6 billion in the first quarter. . . Taxes on corporate income increased $31.6 billion. . . [therefore] profits after tax . . . increased $11.1 billion.

His response:

In other words, taxes extracted 74.2% of any added (marginal) corporate earnings, leaving only scraps for stockholder.

Companies that lost money, on the other hand, were often bailed out and/or nationalized.

Why bother even trying to maximize profits or minimize losses?

I suspect this is a function of the adjustments to capital consumption and inventory valuations in the GDP calculation. Most of the rise in corporate earnings in the first quarter was from financial companies which of course hold no inventory and have little in the way of capital expenditures.

The headline is probably a little hyperbolic, but US corporate taxes are high compared to the rest of the world and need to be reduced. If the goal is to create jobs, one would think that allowing companies to keep more of their earnings would be an easy way to accomplish the task.