Friday, September 16, 2011

Extended Corporate Profits


  1. I've been thinking about this over the weekend. Could this correlate with the MNE's getting more profit from International operations but not repatriating the profits and thereby taxed at the +30% tax rate of the US. Therefore, a spike in profits as a function of GDP is not an evil in the sense of those "nasty corporations" gouging people as it is about a flow of capital problem due to corporate tax rates in the US for foreign earned profits.

  2. Not sure why taxes are relevant here, but I agree that global growth plays a part. The issue is that corporations are outsourcing / growing outsides of the U.S., thus corporate earnings are not necessarily feeding into the U.S. economy.

    That said, how sustainable is all of this? Profits should in theory bring competitors, whether here or abroad. Unless this time is truly different, which it never seems to be.

  3. Taxes are relevant because at the going rate, if the hypothesis is true, the gap in earnings to GDP would be cut by 39%, the current rate at which repatriation costs an MNE. As any good economist will tell you, Taxes can create a distortion in the flow and balance of goods and capital.