Monday, August 30, 2010

Graph of the Day: Corporate Profits

So, you may be wondering why Oregon might be on a position to refund $40 million to corporations while at the same time slash spending on state services like education?  Well here is the picture worth a thousand words: corporate profits are back a pre-recession levels while personal incomes, thanks to persistent and high unemployment, are still very depressed.


This graph is from the NY Times' Economix Blog.

PS: Is a question mark the appropriate stop after the first sentence?  I think so...

UPDATE: A commentator asked if this is the same for Oregon - yes.  Here you go (from the Office of Economic Analysis)





10 comments:

Shawn said...

I assume this is national. If so, what does Oregon look like? Is business rebounding here as well?

BJCefola said...

Maybe this is a silly question, but where is the corporate income going if it doesn’t wind up in personal income figures? Debt reduction/equity rebuilding?

Boom said...

I don't think you can make the same assumption about Oregon business's since we raised the income tax through measure 67 which also added a minimum 1% revenue tax for those who weren't recording a profit.

Chuck said...

The state economists made clear that corporate profits are up, as are cash reserves. They make the statement in the printed quarterly economic and revenue forecast.

Why anyone still supports the spendthrift kicker escapes me.

Jack said...

Actually, Boom, Measure 67 imposed a gross receipts tax of 1/10th of 1%, not 1%, and will hardly make a blip in the numbers above.

On the other hand, the legislature's reform of the BETC program is expected to increase corporate revenues by $55 million, which is more than the $40+ million corporate kicker they are predicting, so the kicker is not really the result of a robust recovery at the corporate level.

JodyWiser said...

Where did you get that the BETC changes would INCREASE corporate revenue?

In February of this year they capped the BETC, and put off use of new, large BETCs for a year.

Patrick Emerson said...

BJCefola,

The answer is yes. Corporations are amassing massive piles of cash that they are, as yet, unwilling to invest. They are waiting, presumably, for stronger signs that demand will pick up soon - of course not spending helps suppress that demand.

Jack said...

Yes, Jody, they capped the BETC's during the special session in February, which REDUCED the tax credits available to REDUCE corporate tax liabilities during this biennium.

Therefore, the amount of taxes corporations are expected to pay is now approximately $50 million MORE than were expected when the official revenue projection was made and the new BETC tax credit limitations were not in place.

Marvinlee said...

Corporate profits are an imperfect picture of corporate health, just as your current earnings do not tell the conmplete story of your financial wealth. Read the report "Is Debt Overhand Causing Firms to Underinvest?" by Filippo Occhino, senior research economist at the Federal Reserve Bank of Cleveland. Go to <www.clevelandfed.org/research. Look for "Economic Commentary" No. 2010-7, July20, 2010. Corporate debt is at a half-century-plus high relative to corporate assets. Real-life examples include Ford, Chrysler, and General Motors.

josh said...

what gets me is corporate tax collections. It seems to me that they paid and then dipped into the -10% to -50% range every other year up until 2008. So they paid less every other year in the negative which didn't help our economy here in OR. It seems that trickle down economics hasn't been working since the 80's when the tax laws were changed. I think Made in the USA should be our mantra now.