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at wikipedia both show for example the rise during the first half of the 1980s and the fall around 2000 the effective rate runs from a high around 50 in 1951 to a low around 25 today you want to remember though that the corporate income tax is a tax on profits not gross income corporate profits essentially are the part of gross income that is not spent corporations don t pay income tax on the income they spend that s why businesses always collect receipts for their spending they document that spending so they can subtract it from their taxable the corporate income tax only applies to corporate income that is not sunk back into the business i m probably making tax accounts heads explode by saying this because it s a crude generalization but it gives you the idea the spending corporations do is about twice the size of gdp the gross income of u s corporations is the total of the income they spend plus the income they don t spend we can estimate this gross income by taking gdp multiplying by two and adding corporate profits roughly then this graph shows taxes paid on corporate income as a percent of gross corporate income graph 2 the effective income tax rate on gross corporate income roughly 1 of gross income since the 1980s suppose we make it easier to compare graphs 1 and 2 by putting the two lines together on one graph graph 3 corporate income tax as a percent of profit blue and gross income red the red line shows the tax as a percent of gross corporate income the blue line shows the tax as a percent of taxable corporate income posted by the arthurian at 4 00 am 0 comments saturday october 15 2016 the extent of business total receipts note than in the data file i ve been using they list both total receipts and business receipts for businesses categories of receipts they also list different forms of business including all businesses and corporations i want to avoid confusion between business receipts of corporations and the receipts of all businesses i think it makes best sense to put the category of receipts first and the form of business last this is what i get total receipts of all businesses business receipts of all businesses total receipts of corporations business receipts of corporations just to avoid confusion so anyway i took total receipts for the two forms of business and put them together on a graph graph 1 for corporations the 1980 2012 average is 1 9 times the size of gdp for all businesses the average is 2 2 times gdp the excel file posted by the arthurian at 4 00 am 0 comments friday october 14 2016 something i did not know stable at 90 thru 1995 decline thereafter something in the tax code posted by the arthurian at 4 00 am 0 comments thursday october 13 2016 getting corporate tax data is like pulling teeth notes to self google tax deductions of corporations historical data click soi tax stats corporation tax statistics irs gov click integrated business data click the link for table 1 because it shows the most years clicking this link lets you open or save the xls file note at irs gov the color of the link text is the same whether you ve visited the link or not just makes it a little extra difficult to see how you got to where you got to the file i got is called 12otidb1 xls one worksheet for the years 1980 2012 annual data just now i m interested in the total receipts of corporations note that some of the cells contain formulas if you copy part of the sheet to work on make sure you copy all of the necessary cells posted by the arthurian at 4 00 am 0 comments wednesday october 12 2016 i finally figured out how to show quarterly and monthly data on the same excel chart quarterly data from fred monthly data from macroeconomic advisers make it a scatter plot not a line chart posted by the arthurian at 4 00 am 1 comments tuesday october 11 2016 mian and sufi from how high debt leads to income inequality an excerpt from atif mian and amir sufi s book on the great recession the fundamental feature of debt is that the borrower must bear the first losses associated with a decline in asset prices for example if a homeowner buys a home worth 100 000 using an 80 000 mortgage then the homeowner s equity in the home is 20 000 if house prices drop 20 the homeowner loses 20 000 his full investment while the mortgage lender escapes unscathed the homeowner loses his full investment while the lender escapes unscathed the irony is that it s the growing accumulation of debt that drives home and asset prices up and later drives them down don t lose sight of that posted by the arthurian at 4 00 am 0 comments monday october 10 2016 spurious correlation in robert lucas s prize lecture by chance the other day i came across spurious correlation at the fred blog they write relationships between macroeconomic time series are not usually straightforward enough to establish with a simple graph the problem is that almost all time series tend to grow in the long term as an economy grows because time series can exhibit a common trend it becomes difficult to interpret whether there is a relationship between them beyond that common trend we call this spurious correlation by chance just now i came across an old one of mine containing an excerpt from robert lucas s nobel prize lecture this excerpt figure 1 taken from mccandless and weber 1995 plots 30 year 1960 1990 average annual inflation rates against average annual growth rates of m2 over the same 30 year period for a total of 110 countries one can see that the points lie roughly on the 45 degree line as predicted by the quantity theory the simple correlation between inflation and money growth is 95 for robert lucas 110 spurious correlations on one graph is good evidence posted by the arthurian at 4 00 am 0 comments sunday october 9 2016 creatures of habit i do a lot just by habit getting dressed in the morning brushing my teeth even sitting down at the computer habit is more effective than memory when you have a memory like mine at my old job before i retired we did a lot out of habit whenever we got a new project to work on the first question was always what similar project did we do before we relied on previous projects to answer how did we solve that problem questions for new projects it was a so so technique it did answer a lot of questions but making improvements was almost impossible sometimes i wonder if the federal reserve makes decisions out of habit when a problem arises do they ask how did we solve that problem before it sure looks that way need to promote growth lower interest rates need to fight inflation raise interest rates need to promote growth what d we do last time lower interest rates already at the zero bound lower rates anyway even if you have to go negative they don t go negative on the idea of lowering interest rates no no they make the interest rate negative because habit tells them they must no matter that interest rates don t go negative habit wins the contest they re not going to change their method they do what habit tells them over at the legislative branch they do things out of habit too everything they do is designed to boost growth there is some disagreement about the right way to boost growth yes but the goal is always to boost growth they never have to stop and think about that and when confronted with inflation their habit is to turn to the fed i showed this graph before graph 1 growth rate of the monetary base see the two red circled areas the one is just before the great depression the other is just before the great recession lightning never strikes twice right what problem could they possibly have been solving when they looked back at the roaring 20s and let the same thing happen again in the first decade of this century now look just to the right of those red highlights see the big spikes short fat ones after the first red circle tall skinny ones after the second spikes both times we know what problems they were trying to solve with the big spikes they were trying to solve the problems they created by letting base growth fall for a decade twice that s an old graph 1 doesn t show what happens after the big spikes last time yes base growth went down below zero and created the 1948 recession this time well here s the new graph graph 2 growth rate of the monetary base this time after the big spikes base growth went down below zero again it looks like they are trying to create another recession posted by the arthurian at 4 00 am 2 comments saturday october 8 2016 where do we stand with rgdp 2 october 3 29 am downloading the macroadvisers monthly gdp dataset data now thru july 2016 last i looked was thru may where do we stand now graph 1 the blue is the monthly data the red is the hodrick prescott as you can see in 2014 and 2015 the blue was mostly above the red pulling it up and in 2016 the blue has been mostly below the red pulling it down the red line on graph 1 uses a large smoothing constant so the line is smoothed a lot not only does the smoothing temper the jiggies of the past few years it also takes out most of the great recession and much of the initial recovery the h p calculation for this graph does too much smoothing to suit me the value 14400 is a standard smoothing constant for monthly data i got it from trubador at the e views forum i use it as a starting point but it doesn t always give me the smoothing i want for a particular graph the standard for quarterly data is 1600 the smaller number provides less smoothing graph 2 in graph 2 the red line follows the general path of the blue somewhat better than 1 unfortunately the downtrend of recent months is worse looks worse in graph 1 the blue jiggies vary over a red trend line that is nearly flat in 2 the trend line takes more slope from the jiggies if it was an up slope we d be ecstatic but it s a down slope and it is discouraging blithely moving on then let s add some more jigginess to the trend this time i ll use the constant that s a standard for annual data graph 3 now the red line follows the blue into the depth of the great recession and the peak of the initial recovery and throughout the graph the red line shows what appears to be a good centerline the central path for the blue if we were looking at 50 years of data this graph might have too much jigginess in the red line but we re looking at only a few years the red line provides useful information unfortunately the trend is still definitely down since 2015 but i think i see the down trend slowing in 3 where it was picking up speed in 2 over the last six months or so the blue line shows a pretty well formed w shape the trend of the w would certainly be flat it would be low lower than the red for most of the last several years but more flat not so much downhill that s a plus for what it s worth there is more hope of economic improvement in graph 3 than in 1 or 2 but you know the blue line is the same for all three graphs it displays the source data that is used by all of the red lines so you can pick whichever trend you prefer and tell whatever story you want about the future but it is only a story and it won t be the story that the source numbers tell the source numbers don t tell us about the future they only tell us about the past our fascinations lead us to tell stories about the future our attitudes color those stories if i reduce the smoothing still further i can show you the red line flattening out in the last few months graph 4 now you could draw a flat line extending the red line out to the right or for that matter you could extend the red line by continuing the curve upward similar to what happened after the mid 2011 low and the early 2013 low you could even make the red line curve down more i suppose it s mostly attitude there is a subset of people who happen to think that what happens in the economy depends on what happens with money i m in that group for sure a subset of that subset thinks that what happens with money depends on what happens with base money at the federal reserve it s their job to be in that group it s easy enough to add base money to the graph we ve been looking at so that s what i did base money in black graph 5 rgdp growth red or blue is mostly in the neighborhood of 2 base money growth black is mostly in the neighborhood of 20 on the right hand scale base goes high around the great recession near 100 and rgdp goes low i m going to say that the ups and downs of the black line on graph 5 have something to do with the policy called quantitative easing i want to test for a relation between those ups and downs and the growth of rgdp on 5 rgdp look at the red line bottoms out in early 2009 just as base money growth black is peaking the red line bottoms out again in mid 2011 again the black line peaks at the same time the red line bottoms out for the third time in early 2013 this time the black peak comes later in late 2013 looks like it tried to peak when the red line was bottoming out but events must have required additional quantitative boost from the fed after that third and final peak in the black line base money growth tapers off the path of the black line shows the quantitative easing policy being applied in response to economic conditions this is the reason the peaks in the black align so well with lows in the red so much for policy s response to the economy what about the economy s response to the policy to see that we have to lag the black line the policy line if i lag it 15 months the red and black peak together graph 6 i like to think this shows that it took the economy 15 months to respond to the fed s first quantitative easing but if you look at the second black peak on 6 the 15 month lag is too much the graph shows the black line peaking after the red when i reduce the lag to eight months these two peaks align graph 7 i like to think that the economy took 15 months to respond to the first black peak but only 8 months to respond to the second the second lag was only half as long this would mean that the metabolism of the economy was picking up and the economy was improving if i was the fed i would have said qe is working look at the low point before the second black peak it lines up well with the low in the red line so the same 8 month lag applies at that low as at the second peak and presumably during the rise to the second peak as well but now look at the decline from the second peak the black line appears to bottom out a couple months before the red this suggests that the economy s metabolism had slowed again that is plausible as the decline of the red is itself an indication of slowing perhaps that unexpected reversal is responsible for the wiggle of the black line visible in the early months of 2014 on 7 it looks as if the fed had already decided to bring the increase to a peak in those early months but suddenly the fed changed its mind and pushed the black line up again to a higher peak the same wiggle appears in the same place on the red line but it look longer for that wiggle...
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