American corporations are enjoying record-high profits. The amount of profits corporations are simply putting in the bank rather than reinvesting is also at a record high. Executive pay is at historic highs with CEOs pulling down 300 times the income of workers and socking away massive bonuses. For four decades, while worker productivity has soared, corporations have pocketed the improvement by rewarding executives, jacking up their own value, and giving almost none of the benefit to the workers actually driving those results.
And while the statutory corporate tax rate is high, the effective U.S. tax rate is pretty average:
Another 2011 study by the Congressional Research Service put the U.S. effective rate at 27.1 percent, slightly lower than the OECD average of 27.7 percent.
Corporations get enough tax breaks now that their contribution to federal taxes is one-third what it was at peak.
So what’s the first action any new Treasury secretary should take when coming into a situation were cash-rich corporations are raking it in and pocketing the results while automation and wage-stagnation leaves workers behind? You guessed it.
"By cutting corporate taxes, we're going to create huge economic growth and we'll have huge personal income," Mnuchin told "Squawk Box," confirming he has been tapped for Treasury secretary.
Trump’s choice for Treasury secretary is exactly the kind of person you would expect from a campaign that railed against Hillary’s Wall Street connections for months.
Steven Mnuchin, a financier with deep roots on Wall Street and in Hollywood but no government experience, is expected to be named Donald J. Trump’s Treasury secretary as soon as Wednesday, people close to the transition say.
Mr. Mnuchin, 53, was the national finance chairman for Mr. Trump’s campaign, and his selection would elevate a wealthy loyalist to a pivotal economic post. He began his career at Goldman Sachs, where he became a partner, before creating his own hedge fund, moving to the West Coast and entering the first rank of movie financiers by bankrolling hits like the “X-Men” franchise and “Avatar.”
Deep roots on Wall Street. Goldman Sachs partner. Hedge fund manager. Whose first goal is to drop corporate tax rates from below average to absolutely bargain basement so that corporations can bank even more massive wealth and executives will need to build new pipelines just for shipping around their bonuses.
The Trump-Mnuchin proposal would cut corporate taxes in half, dropping the rate to 15 percent. It would also drop taxes for money earned overseas, simultaneously filling corporate coffers with currently offshore cash, and giving them massive incentives to move even more jobs overseas. It would be, and almost certainly will be, the greatest gift to corporations ever recorded.
The idea of course, is if we only give those corporations enough money—even though some of them are already making more money than any company ever—they’ll stop kicking their workers in the teeth and decide to reward workers for all that they have done. Maybe executive guilt kicks in when they hit 400 to 1? Or is it 500?
Mnuchin is going to figure that for you. Just get out that trickle-down raincoat, because a storm is coming.