Although there has been recent commentary about the sustainability of corporate profit margins with the stock market bears arguing that the high margins now being reported will soon regress to the mean and the bulls arguing that, at least for now, margins will remain on a high plateau; there has not been any commentary on the sustainability of the historically low corporate tax regime of the past eight years. Just to note the the high profit margin argument of the bulls is being used to discredit the near record high of the Shiller cyclically adjusted price-earnings ratio. (See:https://shulmaven.blogspot.com/2025/06/my-ucla-anderson-forecast-presentation.html )
What few people realize that the current corporate tax rate of 21% is from an historical point of view unusually low. Indeed the 21% rate inaugurated in 2017 is the lowest corporate tax rate since 1939. For example, throughout much of the 1950's to the early 1960's the corporate tax rate was 52% (Not a typo) and from 1993-2017 it stood at 35%. Why is this important?
In an era where most observers believe the federal deficit now running at 6% of GDP is not sustainable in the long run, something is going to have to give on the tax front. Although no change is likely until 2029, a future administration could very well find the corporate income tax as a tempting target to raise revenue. Indeed the higher corporate margins go, the easier it will be politically to increase the tax rate.
Admittedly this is not an issue for today, but it could very well come to the fore in a few years.
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