Friday, October 25, 2013

Capex still relatively weak

September capital goods orders were weaker than expected, and have been sluggish since the beginning of last year. This measure of business investment is hardly impressive, and reflects a chronic lack of confidence on the part of business. With corporate profits at all-time highs, but business investment in capital goods yet to surpass pre-recession levels, it's not hard to see why the economy has been growing slowly. Businesses could be doing a whole lot more, but for a variety of reasons—burdensome increases in regulations and higher taxes, to name just a few—they have been reluctant to invest in the future. The U.S. has the highest rate of corporate income tax in the developed world, the onset of Obamacare has placed additional and heavy burdens on small business, and Dodd-Frank regulations have added huge burdens to the financial industry. Government needs to get out of the way if the economy is to proceed at a faster pace.


marmico said...

The U.S. has the highest rate of corporate income tax in the developed world

Statutory rate, yes. Effective rate, no.

GAO says the effective federal corporate income tax rate is 13% for profitable firms. Back of the envelope FRED graph confirms same.

Scott Grannis said...

No. The GAO study was defective. A more inclusive analysis shows U.S. corporations paid an effective tax rate which exceeded 35%.

Scott Grannis said...

See the details of the more inclusive analysis here:

marmico said...

The PWC study apples-to-apples to the GAO study for profitable firms is found in Table 3, line 2. The federal actual tax in 2010 is 15.1%.

Take your pick - 12.6% GAO or 15.1% PWC of actual tax paid to the U.S. Treasury.

It is interesting that PWC didn't do a "look back" from 2004 of federal actual tax. Every quarter you chart NIPA corporate profits. It should be simple enough when Q3 NIPAs are published next month. Divide the Treasury corporate tax receipts by the mean trailing 12 months profits.

Scott Grannis said...

Why should we ignore foreign tax paid?

Why should corporations pay any tax at all?

marmico said...

Puhleeze. Foreign taxes paid are offsets to U.S. tax payable. Shall I talk about the integrated oil companies? XOM pays extraction royalties to foreign sovereigns which are treated by the IRS as taxes. That's known as a "super offset".

Did AAPL sell 10 million 5s' in Dublin, Ireland (population 1 million) last month?

Stick to your Club for Growth talking points.

I agree that corporate taxes are distortionary but to suggest that statutory rates are in any way related to effective rates is mindless drivel.