Effective corporate tax rates in America have
continually declined over the past 36 years.
The drop from the highs of 45% in 1987 to 17% in 2023
has contributed +20% of the real EPS growth for US
Equities during this period.
The most recent decrease occurred as part of the
Trump tax cuts in 2017, which reduced the top
corporate tax rate from 35% to 21%, leading, in most
cases, to lower effective tax rates for many businesses.
Whilst this tailwind for US earnings may not become a
headwind, despite record US fiscal deficits, the room for
further reductions from this point is limited.