Monday Edition: Corporate Greed?

1. Trump’s “Intriguing” Plan to Get Rid of Income Taxes

At a recent meeting with GOP lawmakers Donald Trump reportedly proposed getting rid of the income tax and replacing it with an “all tariffs policy” on imports. (CNBC)

Republicans like Rep. Thomas Massie of Kentucky thrilled to the idea.

Here’s how the issue was framed by the Committee to Unleash Prosperity, a right-leaning, pro-free market nonprofit:

The idea of replacing the evil progressive income tax with rates that exceed 40% and at one point reached 91%, and replacing it with a 10% flat income tax, would be pro-growth.

Tariffs are taxes on consumption. It is better to tax consumption than to tax saving and investment.

Counterpoint: The costs of tariffs often end up getting passed onto the consumer.

  • According to an analysis by the economist Brendan Duke, Trump’s tariff-for-revenue plan would end up hurting lower-earning Americans (who pay relatively little or no federal income taxes) the most.

One 2020 study found that tariffs would only cover about 8.8% of U.S. tax revenues.

  • This figure would drop to just 3.2% after countries retaliated with tariffs of their own.

  • The ensuing trade war would also reduce U.S. household consumption by 3.5%.

Tax Foundation Research Director Erica York:

The individual income tax raises about $2 trillion annually on a tax base of personal income of roughly $15 trillion.

Customs duties currently raise about $80 billion annually on imports of $3.4 trillion.

2. The Truth About Corporate Profits

Amid the big debate over whether greedy corporations are to blame for higher prices, there’s been a misperception about their profit margins. (NYT)

New York Times political correspondent Nicholas Nehamas:

The liberal argument that corporate greed has driven prices higher flows from a recent surge in corporate profits, notching record highs after the pandemic. They say many companies, particularly in industries with relatively little competition, have used the reopening of the economy to test how aggressively they can raise prices.

59% of Americans say “corporations being greedy and raising prices to make record profits” is a major cause of inflation, per a February poll from Navigator Research, a left-leaning polling firm.

  • That’s up 15 points since January 2022.

  • 3 in 4 Americans agree that “corporate profits and CEO salaries are at an all-time high, outpacing inflation: corporations have given their CEOs big bonuses and their shareholders big stock buybacks, while raising prices for families and small businesses.”

A 2015 American Enterprise Institute analysis: The public overestimates how much profit companies are making.

  • The typical American thinks companies make a 36% profit margin on sales after taxes.

  • Currently, the average after-tax corporate profit margin sits at slightly less than 10%.

A Federal Reserve Bank of San Francisco study from last month: Aggregate markups (the difference between the cost of making a product and how much its sold for) have remained flat since the U.S. started recovering economically from the pandemic.

The study’s authors: “Rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery.”

3. 6 Charts on the State of Renewable Energy

Renewables generated a record 30% of global electricity last year.

Clean energy technology costs have gotten way cheaper.

Some signs point to a peak in fossil fuels.

Solar investment has overtaken that of every other energy source:

Despite headlines to the contrary, electric vehicles sales continue to grow.

Last year, renewables (wind, solar and hydro) produced more electricity in the European Union than fossil fuels.

4. It’s Milei Time

There are glimmers of economic hope in Argentina, where President Javier Milei instituted drastic austerity measures to curb out-of-control inflation. (Reuters)

Chart: Reuters

Argentina’s inflation rate is now at 4.2%, the lowest since 2022, and has declined for the five consecutive months Milei’s been in office.

Against the odds, Milei recently managed to get the Argentine Senate to approve several of his key reforms.

  • The legislation includes broad presidential powers in areas such as energy, pensions, and security, along with incentives for foreign investors, tax amnesty for undeclared assets and plans to privatize some state-owned firms.

  • Milei’s party holds only a tiny minority of seats in the country’s Congress, complicating efforts to pass laws and requiring deals with the opposition.

There are still plenty of challenges: Argentina's currency, the peso, has depreciated significantly, poverty levels are rising, and violent protests recently broke out near Congress.

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