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In a nutshell why the economy is lopsided benefitting some, ignoring many. Labour's (salaries of all working people including professional classes) share of gross domestic income is 50% in 2026 the lowest since 1947, and profits highest since 1950 at 12%. Then you have hourly wages up 3% since 2019, while profits are up 50%. Greg Ip of the WSJ says the causes are complex and implications sobering. He says you can be a red blooded capitalist and still worry- is something wrong or unsustainable? Political stability, good governance structures, good institutional structures that were set up since Lincoln (the beginnings for the Industrial Revolution), by TR and FDR/Frances Perkins (the basic institutional and good governance structures of modern America and now the industrialized world that allied labor and capital with fairness to all), the entire setup needs to be rebuilt and renewed. The problems are also appearing in Europe and causing dismay, with calls for rebuilding and renewal. ...

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BP has serious problems with its corporate culture, and with management board that has failed in finding a good CEO and a good chairman. BP chairman Manifold from a Irish Building Supplies company is removed for being too aggressive and "shouty," belittling colleagues. This is the thrid chairman in a short time and happens when a new CEO joined in April. The previous CEO was let go because of his green strategy and net zero goals that led to a decline in profits. The new CEO's job was to withdraw from the green strategy to tackle climate change and transition away from fossil fuels.

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Pressure from rising commodities prices on corporate profit margins.

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Corporate concentration with larger companies, each more dominant in its industry, and fewer companies controlling half of U.S. corporate profits, are trends economists say that hurt wages, create income inequality, shrink the middle class and lead to less consumer welfare. About 30 companies control half of U.S. corporate profits in 2018 compared to 109 in 1975, according to economists at the University of Arizona. Fewer companies in each industry mean less competition for workers, and less leverage for workers in setting wages. Apple Computer just reached the trillion dollar size and Amazon is close to doing this with its dominance in online shopping. Amazon is known for lower wages in its industry. Apple has some of the highest profit margins in  industry, and trends show the margins have risen between cost of making a product and price in an unprecedented way. The result is higher corporate profits and labor commanding a declining share of the nation's wealth. ...

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Paul Hannon in the WSJ tells the story of how the Swiss now support the 15% corporate minimum tax. 78% of Swiss voters support the new tax in a referendum. Switzerland is now trying to change the bad reputation it had gained as a place companies moved to shift profits to low income tax locations. Switzerland now joins 35 countries implementing the 15% corporate tax in 2024 and 2025, including the 27 members of the European Union, Australia, Japan, France and the UK. 15 other countries say they will do so in that time frame.

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WSJ says GM straddles the past and the future. GM's plans to invest $11-13 billion each year for new electric vehicles. GM also plant to cut costs by $2 billion to maintain profit margins as car prices drop from higher levels. GM US largest automaker profit in 2022 kept up the pace of 2021 by remaining at over $14 billion. As car sales decline in 2023 GM plans to offer sales incentives and make up for this by cutting costs in corporate and other overhead.

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This NYT editorial brings up the 14-19% tax proposed by U.S. president Obama for overseas profits of U.S. companies. The 5.25% tax in 2005 under the Bush administration for repatriation of about $300 billion did not result in a positive experience says NYT, as most of the money went into dividend payments, share buybacks, and severance for laid off employees. It led to a new surge in unrepatriated profits in the expectation of another tax holiday of this type. A Senate investigation in 2013 showed Apple has $100 billion in Ireland with no tax paid on much of this amount, as cited here. The NYT says Apple shows arrogance in thinking the EU Commission which has taken up cases on tax avoidance of Fiat, Starbucks, Amazon, BASF, would not look at Apple in Ireland. It calls tax deferral on overseas profits as the root of the problem, as it allowed companies initially to look at investment opportunities, but now simply to stash the money abroad till some better tax arrangement can be achieved with U.S. Treasury. The Obama administration proposal was to immediately tax existing profits at 14%, whether repatriated or not, and thereafter at 19% on profits moved offshore. The NYT is in favor of ending corporate tax deferral altogether, and applying taxes on profits in the same year they are made.  ...

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Key aspects of the new tax plan of the Trump administration are a 35% top tax rate for individuals, instead of the current 39.6% top rate, and lower brackets at 10% and 25%. Standard deductions are to be doubled, other deductions except for mortgage interest and charitable giving, are to be eliminated. The deduction for state and local taxes will be eliminated, with this hurting residents of high local tax states such as New Jersey, New York, and California. Gary Cohn, head of the National Economic Council and Treasury Secretary, Steven Mnuchin,  have helped formulate the plan. Cohn sees a big opportunity here for a huge tax cut and simplifying the tax system. The corporate tax rate would drop from 35% to 15%, and future foreign profits would owe little or no taxes. Corporate tax rates are lower in the UK, Germany and Japan- closer to 20%, and France has a similar 35% corporate tax rate. The hope of the Trump administration is that this will generate 3% GDP growth rate and spur creation of jobs. Still to be decided at what level tax brackets for individuals will be set, and what level earlier foreign profits will be taxed, and the child care break. ...

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Dell is more dependent on corporate buying of PC's than HP and Acer. In todays world companies tend to hold onto their older PC's for longer and this affects Dell's PC sales. Dell was slow to adapt to the changes in the PC industry, where preconfigured laptops could be made at lower cost in China than at Dell's factories on customized basis. HP and Acer moved quickly into these Chinese factories, and Dell was a latecomer to contract manufacturing. Michael Dell returned to day to day responsibilities and he has made several changes. Dell is increasing its retail presence, and acquired Perot Systems for $3.9 billion in 2009 to expand in the services business. Company demand is improving gradually and Desktop PC sales went up 13% and laptop sales up 18% in the first quarter compared to 2009 same quarter.

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Rishi Sunak, Britain's finance minister, defends the increase in the corporate tax rate to 25%, saying the increased receipts from corporate tax in recent years were because of cyclical recovery of corporate profits which took a hit in the financial crisis. He says that the cuts in the rate by George Osborne, former Tory finance minister, have not led to increased business investment. Osborne cut taxes to 20% from 29%, lowest in G20 countries and Hammond who succeeded Osborne as finance minister cut the rate to 19%. At 25% the corporate tax will still be the lowest in the G7 countries. France, Japan and Germany have corporate tax rate of 30-31%. Higher taxes would help finance needs for government investment in infrastructure and health services, public services, and tackle the financial situation arising out of the pandemic support. The last time taxes were raised was in 1973. This also shows that the UK and the rest of the world is looking at the mixed results shown from cutting taxes. Business investment has not resulted from the business tax cuts in the way that would support creating job growth, some of the investment only supporting automation. The investment in infrastructure is lacking from the business sector leading to the need for government to use taxes for renewal in updating infrastructure. The rise of China with new infrastructure has only shown the problems with simply cutting taxes in the hope that job growth, economic growth, infrastructure growth would happen as hoped. This is why the Tories under Boris Johnson are trying a new approach to get the job done. ...

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The European Union Commission says Ireland must recover 13 billion euros in back taxes for giving tax preferences to Apple that are against EU rules. The EU Commission says Ireland allowed Apple to pay a corporate tax rate of 1% on its European profits in 2003, and .005% in 2014. The EU Commissioner says the use of Ireland as the place where Apple pays taxes on operations in Europe has no base in reality, as most profits are earned in other countries outside Ireland. Taxable profits of Apple "did not correspond to economic reality," according to Ms. Vestager, the EU Commissioner.  In the current environment where political upheaval is unsettling the democratic process in the U.S., Britain, Spain, France and Italy, as well as in Brazil and other countries in the developing world- because of deep recessions, and efforts to cut the deficits with deep cuts in state spending including in education and healthcare, basic services- the moves by companies to reduce taxes to these absurdly low levels such as .005% when other companies in the EU are paying 12.5%, is becoming increasingly unpopular. As pointed out in this BBC News article this sounds like the way Carnegie, Rockefeller and Vanderbilt operated during the late 19th century, and were seen as operating in a manner that was above the law. Janet Yellen pointed out at a Boston Fed Conference on inequality in Oct 2014 that the bottom half of the distribution or 62 million households in the U.S. in 2013, had a net worth of about $10,000, One quarter of these households had a net worth of zero dollars. The working class and blue collar workers in the U.S. provide much of the support at Trump rallies. Younger college educated people support Sanders, because of the situation of the working and middle class in the U.S., and a similar situation exists in Europe. It is for the sake of the democratic process and delivering services in education, healthcare, and other basic areas to all, that companies small and large need to pay their fair share of taxes, regardless of size, influence, or technological advantages. Today this is is seen by most leaders who draw public support as the right way forward for the U.S., Latin America, Europe and Asian countries, including proper allocation of resources to best serve the needs of working people. For example the 13 billion euros is equal to all of Ireland's healthcare budget, and 66% of its social welfare budget.    ...

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EU leaders and proposals to limit tax avoidance by digital companies by requiring the companies to show the profits in the countries where they are made. This would require changing bilateral treaties. France is looking at proposals to tax companies by the number of clicks or user data. Large digital companies, including Apple and Google declare most of their European revenue in Ireland using legal loopholes in that country to shift profits to lower tax locations. A Senate report in the U.S. in May 2013 shows Apple using technicalities in Irish and U.S. laws to pay only a small amount in corporate taxes in four years 2009-2012 on $74 billion. Fredrik Reinfeldt, the prime minister of Sweden stated the argument for fairness in tax policy- "These companies ask for a lot of investment in infrastructure, in research and development, they want to have well educated staff members. Well, let's keep that together: Pay your taxes so we can afford all of these investments."

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Lower oil prices, higher corporate profits, and restrained spending, lead to improvements in Japan's budget deficit. There is a 24% increase in corporate taxes in Japan's budget estimates for 2015 compared to Dec. 2012 when prime minister Abe assumed office. This will help reduce the budget deficit. The budget assumes an oil price of $69, making the budget plan achievable with prices below $50 in Jan. 2015. For the next fiscal year tax revenue is expected to increase by 5.4% over the prior year, with half of the increase from the sales tax increase and the other half from the higher economic growth. Budget projections assume 3.6% global economic growth, exports up by 5.2% in real terms, and imports up 3.9%. Spending is kept under control increasing by just 0.5% from the current fiscal year budget, and borrowing reduced by 11%. The government plan is to produce a primary budget surplus by 2020, and cut the deficit by half in the primary budget which excludes bond issuance and interest payments, by fiscal 2015....

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Reaganomics, trickle down economics, it is clear don't work. James Mackintosh says in WSJ, the latest version of Reaganomics, in the form of the LIz Truss budget in September 2022 with cuts in corporate taxes, no relief for vulnerable populations in the cost of living crisis as in all other major European countries and in the US, is already getting a bad reception in financial markets with the tumbling of the British pound.Times have changed there is nothing to be gained in its approach as there are no trade unions strangling growth as in Thatcher's time that need to be restrained, and not that much red tape to increase business flexibility. Most of the privatization has already been done and some of the state run companies are operating much better today than privatized companies handling water and other services.   Instead the problem is one of much needed investment in infrastructure and public services, and social protections after the pandemic. Businesses are not being crippled by high corporate taxes. Instead the opposite is the case, with windfall profits, so that the opposite approach taken by president Biden to use the higher tax on profits of Tech, oil and other companies to finance social protections and a huge climate energy initiative made more sense, leading to the passage of the $369 climate bill  and Inflation Reduction Act of 2022.  The WSJ makes these points- Britain has a higher current account deficit and higher debt at over 100% of GDP compared to the period of Thatcher in the 1980's when debt was only 40% of GDP. Most important is what the WSJ says about what has happened since the 2009 financial crisis and the austerity policies pursued after that crisis that were worsened by the pandemic so that public services in Britain are actually crumbling. Politically this lacks popular support and little backing at a time of a recession in the British economy, because such policies require public support to go through a tough period . And taking this trickle down economics today when Britain faces a cost of living crisis may be an unwise act of taking an approach that is no longer relevant or shown to be working at the worst possible time, says the WSJ. ...

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The corporate income tax rate for American companies is 35%. But many American corporations do not pay 35%. G.E. is likely to pay no federal income tax in 2010. G.E. Capital lost billions during the financial crisis and it is using a tax loss carry forward. It is also using a tax break called the active financing exception which allows U.S. companies to avoid taxes on overseas profits if those profits are made by actively financing some activity or deal, a tax loophole created in 1997 that G.E. lobbies hard to keep. For G.E. the worldwide tax burden was 7.4%. Google also pays a low tax rate. Robert Willens, a corporate tax expert, says the typical multinational corporation pays about half the stated tax rate.

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With dividends and inflation factored in the S&P 500 went up by 1.3% in the last 10 years according to Morningstar, Inc.The S&P 500 stock index the basis of $1 trillion invested in US index funds was at 1352 on Tuesday this week, it was 1362 in April 1999. Prof. Sylla of NYU Stern School of Business sees corporate profits falling to 3% or 4% of economic output from the 9% in 2006. Typical year corporate profits are about 5 to 6% of total economic output so this number is likely to revert to the mean and go a bit lower as it overshoots in one direction then to revert to the mean it has to overshoot in the other direction for a while. This and higher inflation should bring down stock prices further.

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GST revenue increase is important because it finances healthcare, education, infrastructure building, jal ghar and cooking gas, Digital India initiatives, housing programs in a way that has never happened before and is needed for modernizing the Indian economy. The same approach is being taken by president Biden in the US to finance his climate and tax bill of $369 billion. It is the biggest climate action bill in history and revenues to finance renewable energy transition are coming from a 15% minimum corporate tax that is being agreed to by all countries in the world including US, Britain, European Union and India. Just today the WSJ the largest biotech company Amgen in the US paid 3.5% effective tax rate on revenues for 2013 when tax rate under federal law was 35%, and the IRS is working on getting $10.7 billion back in payments due over a decade. Much of Amgen's profits of $24 billion had been shifted to a location in Puerto Rico says a report in WSJ. The development work of the free world countries including US, EU, and India cannot happen without this. Without this the US, EU and India cannot even remain competitive with China or tackle national security threats. ...

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Nelson Schwartz of the NYT looks at the town of Neenah, Wisconsin, a year after the election in Wisconsin, Michigan, Pennsylvania with 80,000 votes swinging the other way from blue to red handing the election to Mr. Trump. The pressures are still there with cheaper imports, paper mills about to close, and workers still struggling to keep the same lifestyle as their parents. Even with low unemployment of about 3% in Wisconsin, with the slow increase in wages and corporate pressures for profits, trade wars, the sense is that the problems of the American middle class are still just as deep.

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In comparison to industrial companies digital companies such as Google and Apple have more room to find gaps in the U.S. tax system which was designed for the industrial period. Apple paid a tax rate of 9.8% in 2011 on its global profits in 2011 of $34.2 billion, a total of $3.3 billion. Wal-Mart for instance paid a tax rate of 24%, on its booked profits of $24.4 billion, a total of $5.9 billion. The issue is significant because of the large U.S. deficit and spending cuts by local and state governments for essential services, especially in California, where Apple is located. Apple is able to avoid state taxes on some of its profits by locating an office in Reno, Nevada. Nevada has zero corporate taxes, California's corporate tax rate is 8.84%. In the current fiscal year Apple is expected to earn $45.6 billion which if taxed at the rates companies paid in the 1950's - 30% in the 1950's compared to 6.6% in 2009 for corporate tax receipts according to a New York Times report- would enable the state of California to avoids some of the sharp cuts in funding to community colleges such as De Anza College only minutes away from Apple, Google and H-P. De Anza College's president says he simply cannot understand this, how the whole psychology of corporations and the public itself has changed over the years, to where a college where one of the Apple co-founders Steve Wozniak got his education in 1969-74, is now struggling to survive with funding cuts. The California college system of the 1950's and 1960's was funded by other companies tax dollars creating the educational resources which helped create todays companies- one generations responsibilities transferred to another generation that has failed to understand what this is about....