How much have falling interest and tax rates contributed to corporate profit growth in the US? A lot, according to a new paper out of the Federal Reserve, which our colleague Chris Flood kindly highlighted for us.
The paper, authored by Michael Smolyansky, a senior economist at the Fed, points out that before the financial crisis the ratio of interest and tax expenses to earnings before interest and taxes (EBIT) hovered around 45 per cent. Earlier this year this measure had slumped to just 26 per cent.
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