Corporations are making more while workers enjoy less

By Kathryn Anne Edwards / Bloomberg Opinion

America is now living in what might be called the Age of the Corporation.

Corporate profits, after having reached 8% of GDP only once in the previous 94 years, have averaged 9% since 2021. The statutory corporate income tax rate, meanwhile, is now just 21% — down from 52% in 1960 — as federal tax revenue from corporations has fallen from 4% of GDP to just 1.8% in that same period.

That’s as it should be, conservative economists would argue. Corporate taxes are among the most distortionary because capital is mobile. If the federal government taxes a company too much, it can move abroad, leaving the U.S. with fewer jobs, less growth and slower innovation.

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As corporate profits soar, the labor share of income in the U.S. has cratered. The last two years saw wages and compensation fall to the lowest levels since 1941. And these two developments — workers get less money, corporations get more — are absolutely related. Meanwhile, CEO compensation has skyrocketed over the past six decades, rising from 21 times that of the average worker to 281 times.

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