US corporate net profits before tax (Corporate profits) fared somewhat better than corporate operating profits (Net operating surplus) from 1948 to 2012, the former having grown at the average annual rate of 3.36%, against 2.99% for the latter. Corporate taxes did not benefit from the profit performance, as they grew at the lower rate of 2.39% per year. Trends emerge clearly from the regression lines (dotted lines) in the chart.

A closer analysis shows that:

1. Exception made of the periods 1980-1993 (Reagan and G. Bush mandates), and 1998-2002 (Clinton presidency), net profits grew always faster than operating profits. This means that private enterprises succeeded in complementing their core business results (net operating results) with extraordinary results such as benefits derived from interest and dividends receivable on financial assets owned by the corporations (e.g. cash management and other financial instruments).
2. Growth of corporate taxes always lagged behind growth of net profit, except for the periods 1938-1961, and 1969-1970 (economy recession under Nixon's mandate). In other words, since the years 1960, US fiscal policy emphasized a lenient taxation of business corporations, while gradually augmenting the weight of individual income taxation. Stockholders helped themselves with a larger slice of corporate profits, at the detriment of both compensation of employees, and of taxes paid to the community. 'Maximizing shareholder value' won the battle.

The chart below shows the variation of Net operating profits (Nop), and of Corporate taxes (Tax), relative to Net profits before tax (profit), as given by the differences (Nop-profit, and Tax-profit) between the respective values provided in the table. Trends are indicated by the regression (dotted) lines.

Trends of US corporate operating results and of corporate taxes relative to net profits  

Sources: BEA - US Bureau of Economic Analysis.

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