Week-end Wrap – Political Economy – August 18 2024
by Tony Wikrent
Strategic Political Economy
The world will lose $4.7 trillion of revenue in the next decade to tax havens. How did we get here?
[The Business Standard, via Naked Capitalism 08-16-2024]
American Pharmaceutical Companies Aren’t Paying Any Tax in the United States
Brad W. Setser and Michael Weilandt [CFR, via Naked Capitalism 08-16-2024]
It is an undisputed fact that American pharmaceutical prices are the highest in the world…. However, those high prices do not translate into high reported profits in the United States. Rather the contrary: large pharmaceutical companies generally report losing money in the U.S….
So high prices strangely seem to correlate with large losses. This, of course, is a clear sign that pharmaceutical companies live in a world marked by transfer pricing and tax arbitrage….
The average effective tax rate paid in the U.S. (so U.S. tax paid versus global profit) was only 3 percent from 2018 to 2022, well below the typical effective tax paid in the US before the Tax Cuts and Jobs Act (see the work of Senator Wyden and his staff for more details).
A Very Good Sign: Kamala Harris Is Going Right at Corporate Greed
Nick Hanauer, August 16, 2024 [The New Republic]
… Greedy CEOs have milked the average American household for $12,000 since the pandemic. As a businessman, I can explain how they’re doing it. ...if you compare corporate profits in 2019 to the last four years, you’ll find corporations have gouged their way to an almost unbelievable $1.5 trillion in excess profits since 2020—that’s in addition to their pre-pandemic profit rates.
That means the average American household has paid an eye-popping $12,000 in higher prices solely to pump up quarterly corporate profit margins. To put that figure into perspective, $12,000 could buy the average American household more than two years’ worth of groceries….
Over the last two years, CEOs learned they could get away with padding their profits by keeping prices high. We have really great evidence that this is what’s been happening, because CEOs admitted this is what’s been happening.
For example, Procter & Gamble chief financial officer Andre Schulten bragged during a 2023 earnings call that even though the company’s input costs to make diapers had decreased, they were still keeping consumer prices high….
This corporate embrace of price gouging is a new and troubling development in American capitalism. And this is an area I know something about.
I’ve founded, financed, and/or run 43 different companies, spanning a dozen different industries…. I’m deeply acquainted with all the tricks of the trade when it comes to corporate profit margins.
But I’ve never seen executives exult in raising prices like this….
The chasm between corporate costs and profits has never been greater in my lifetime:
- Food and beverage retailers’ profit margins have risen by 29 percent from the pre-pandemic norm.
Immediately before the pandemic, corporate profits were 9.7 percent of the total gross domestic product. From 2020 to 2023, they spiked to an average 11.2 percent of annual GDP. The disparity between those two numbers amounts to a jaw-dropping $1.5 trillion more of our economy that was transferred over to corporate profits in the last four years.
That money was picked directly from the pockets of American families, who each paid $12,000 more to plump the profit margins of corporations (and that’s not even counting the excess APR rates that have cost the average credit card user $946 over the same four-year period)….
