Note on the Profitability of Domestic Nonfinancial Corporations, 1960-2001 (by Daniel Larkins)
The profitability of domestic nonfinancial corporations decreased in 2001, continuing a decline that began in 1998. The decrease was considerably more pronounced in before-tax measures than in after-tax measures.
Before subtracting corporate profits taxes, property income's rate of return on capital dropped from 7.7 percent in 2000 to 6.9 percent in 2001, the lowest rate since 1960 (chart 1 and table 1).1 After subtracting profits taxes, the picture is different. Because taxes dropped sharply in 2001, the after-tax rate of return slipped only from 5.7 percent to 5.5 percent, only a little below its median value for the past 42 years. The drop in taxes partly reflected retroactive provisions of the 2002 economic stimulus bill.
Before- and after-tax measures differ even more sharply in the case of property income's share of domestic income. The before-tax share dropped from 15.4 percent in 2000 to 14.5 percent in 2001, the lowest rate in more than 40 years. In contrast, the after-tax share increased slightly, from 11.3 percent to 11.5 percent.
Over a longer period, however, the before- and aftertax measures of rate of return and of income share paint similar pictures. All rose steadily from 1992 to 1997 and then turned down; all then decreased for 4 years. In 2001, all were about 25 percent below their 1997 peaks.
(from the SURVEY OF CURRENT BUSINESS, Sept. 2002.
http://www.bea.doc.gov/bea/ARTICLES/2002/09September/0902CorpProfit.pdf)
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Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
