Corporate Income Taxes Predict Profits

We track corporate taxes as a way to measure earnings in close to real time. The record corporate taxes paid in fiscal 2021 predicted the record GAAP earnings.

I compared the corporate taxes collected since the April 15th collection to see if tax remittance was lower (i.e. lower earnings) this year compared to 2021:

That is an increase of 7%. The implication being that earnings should still show growth, even through the inflation and rate hike hysterics. Inflation is not money destruction like taxation is. When prices rise, it means that some parts of the economy receive more money…even as business slows down.

Corporate profits are widely expected to drop in the current quarter (and stocks have priced it in). If, as the tax data is suggesting, they don’t drop, then we could see a solid upward repricing of stocks this summer.

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ANG Traders

ANG Traders

Forty years of private equity trading, and still learning.