Friday, June 18, 2010

The Long Decline

Definitely an aspect of the long decline, though perhaps not one we might expect, this graph (showing a history of the corporate income tax) is from the Tax Policy Center (Urban Institute and Brookings Institution):

Corporate income taxes declined relative to GDP from the early 1950s to the early 1980s -- the Keynesian period of the postwar world. Then during the next thirty years, the thirty years of Reaganomics, corporate taxes declined no more, but were stable. Who'da thunk it?

The graph shows a kink, a trend change, at about the same time as the two graphs in my recent post on the Keynes/Reagan Shift. I was gonna let that go. I wasn't gonna show the graph, but then I happened upon this...

This paper replies to Michel Husson’s (2009a; also Husson 2010) critique of my study of movements in the rates of profit of U.S. corporations (Kliman 2009). I showed that rates of profit fell markedly, beginning in the late 1950s and continuing through the early 1980s, and that no sustainable rebound in profitability took place between the trough year of 1982 and the trough year of 2001.

...from the PDF Masters of Words, by Andrew Kliman.

The corporate income tax is a tax on profit. The graph shows that corporate taxes followed a path very similar to the path of corporate profits as described by Kliman. Kliman's PDF goes on to say "this persistent fall in profitability is an underlying cause of the latest economic crisis, since it led to ... mounting debt problems."

I don't buy that. I have my own ideas about the origins of our debt problems. But Kliman's description of what happened to corporate profits matches up remarkably well with the graph, above. There's just something very satisfying, when things match up that well.

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