Economic Snapshot | Budget, Taxes, and Public Investment

The data show little need to increase our coddling of corporate profits

A common theme uniting many conservative economic plans is that policymakers in recent years have somehow hamstrung the ability of American business to make profits. This theme comes up most clearly when conservatives decry a “regulatory onslaught” and when they call for a cut in corporate income tax rates to make U.S. corporations more internationally “competitive.”

However, the claim that American business is suffering seems awfully hard to square with the data. The figure below shows pre- and post-tax profit margins in the U.S. non-financial corporate sector. The profit margin is the share of unit prices that is claimed by profits rather than employee compensation or other business costs like depreciation. Both pre- and post-tax margins have been extraordinarily high in recent years, with each reaching their highest levels since the mid-to-late 1960s. In other words, there is little need to increase our coddling of corporate profits.

Economic Snapshot

The data show little need to increase our coddling of corporate profits: U.S. corporate pre- and post-tax profit margin rate*, 1947–2014

Year Pre-tax Post-tax
1947 17.5% 8.7%
1948 19.7% 11.4%
1949 18.2% 11.3%
1950 20.4% 9.7%
1951 20.2% 8.3%
1952 18.0% 8.6%
1953 17.0% 7.7%
1954 16.8% 8.8%
1955 19.2% 10.2%
1956 17.4% 9.1%
1957 16.3% 8.6%
1958 14.5% 7.8%
1959 16.8% 9.1%
1960 15.3% 8.6%
1961 15.3% 8.6%
1962 16.4% 9.9%
1963 17.2% 10.5%
1964 17.7% 11.1%
1965 18.7% 12.0%
1966 18.5% 11.7%
1967 16.8% 10.8%
1968 16.3% 9.8%
1969 14.1% 8.1%
1970 11.1% 6.4%
1971 12.2% 7.4%
1972 12.8% 8.0%
1973 12.7% 7.4%
1974 10.6% 5.4%
1975 11.5% 6.9%
1976 13.2% 7.9%
1977 13.5% 8.2%
1978 13.5% 8.3% 
1979 12.0% 7.1%
1980 9.9% 5.6%
1981 10.6% 6.9%
1982 9.3% 6.8%
1983 10.5% 7.5%
1984 12.1% 8.7%
1985 11.4% 8.4%
1986 9.3% 6.2%
1987 9.8% 6.3%
1988 10.2% 6.7%
1989 9.1% 5.7%
1990 8.3% 5.2%
1991 8.3% 5.5%
1992 8.5% 5.7%
1993 9.6% 6.5%
1994 11.3% 7.8%
1995 11.8% 8.3%
1996 12.6% 9.1%
1997 12.9% 9.4%
1998 11.5% 8.2%
1999 10.6% 7.2%
2000 8.7% 5.6%
2001 7.0% 4.9%
2002 8.5% 6.7%
2003 10.2% 7.9%
2004 12.2% 9.1%
2005 13.3% 9.2%
2006 14.5% 10.1%
2007 12.7% 8.6%
2008 11.2% 8.1%
2009 10.5% 7.9%
2010 13.6% 10.5%
2011 13.7% 10.7%
2012 14.3% 11.0%
2013 14.9% 11.5%
2014 14.7% 11.1%
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* The profit margin is defined as unit profits (profit per unit of sales) divided by price per unit in the non-financial corporate sector.

Source: Author's analysis of Bureau of Economic Analysis National Income and Product Account Table 1.1.15

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