What’s good for American corporations isn’t necessarily good for Americans

What’s good for American corporations isn’t necessarily good for Americans

By Tim Fernholz at Quartz

http://qz.com/181646/whats-good-for-american-corporations-isnt-necessarily-good-for-americans/

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But does that matter if US corporations are still the most profitable? Research on corporate finance by Sean Starrs, soon to be a professor at the City University of Hong Kong, finds that American dominance is far from over. Working from a data-set of the top 2,000 corporations in the world divided into 25 sectors, Starrs found that American firms have the leading profit share in 18, with no other country coming close. He concludes that “despite almost seven decades of increasing global competition and the rise of vast regions of the world (most of all East Asia), American transnational corporations continue to dominate the pinnacle of global capitalism, a phenomenon that national accounts miss.”

But what’s also missing is the connection between American corporate profits and the US itself. How do corporate profits at US companies benefit America?

One way is corporate taxes. The Center for Tax Justice released a new analysis today of income tax payments made by the 288 US Fortune 500 corporations that were profitable between 2008 and 2012. Corporate tax revenue has been falling in recent years, and the report finds the average effective tax rate was 19.4%, much lower than the statutory 35% rate, and a third of the companies paid an effective tax rate of less than 10%.

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Finally, there is ownership. At the end of the day, US corporate profits revert to the people that own their stock. Sometimes this is a technicality, especially with so much unrepatriated income—that’s when you see bank-shot plans like Apple’s to borrow money to pay stockholders in the hopes that the tax costs will eventually be less than the interest. Foreign profits do mean good things for America’s public companies, but only 52% of Americans own stock—and more than 10% of US equities and more than 40% of US corporate debt is owned by foreign investors.

All this isn’t to predict disaster or to suggest that US corporate success isn’t an important phenomenon. But it does point to the lack of a straight line between US corporate domination and benefits to the majority of Americans, all because of the basic infrastructure of globalization. As Starr notes, the way corporate profits return to US drives inequality, disproportionately benefitting the wealthy.




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