U.S. Corporations Bring Home Biggest Slice of Economic Pie Since 1929

IT’S A DANDY time for corporate America: While employee compensation dropped to its lowest level in 65 years in 2013, corporate profits reached an 85-year high. The Commerce Department reported last week that corporations earned $2.1 trillion in 2013, pocketing (after taxes) 10 percent of the country’s GDP. Before 2010, the highest level of after-tax profits was 9.1 percent in 1929, the year the government started keeping records (and the year the Great Depression began). U.S. corporations doing business overseas earned $2.1 trillion in foreign profits, almost doubling their earnings in a five-year span. Overseas earnings are effectively untaxed, which has prompted corporations to come up with more and more creative ways of making money earned at home look like money earned internationally. The news prompted Senate Finance Committee Chairman Ron Wyden to call for reform, saying, “I do think there need to be some reforms in this area.” General Electric collected the biggest overseas profits: $110 billion. The conglomerate told Reuters, “GE operates in more than 170 countries, and most of these overseas earnings have been reinvested in active business operations like manufacturing facilities and loans to non-U.S. customers.” Employees, meanwhile, took home the lowest-ever recorded wages and salaries at $7.1 trillion, or 43.5 percent of the economy. They also received fewer benefits: Health insurance, pensions, and other non-cash payments in 2013 were at their lowest since 1948, when the employer-financed system of health insurance was just getting under way. Why are workers receiving a dwindling portion of the nation’s income? Some chalk it up to unions’ declining negotiating power and to globalization, which has turned over some jobs to cheaper workers abroad. Technology also plays a role, as does government policy. Meanwhile, corporations have been aggressively lobbying to lower the 35 percent top corporate tax rate. Apparently it puts them at a disadvantage in the competitive global market.