Brookings Papers on Economic Activity, 1:1974 
Tabic .. Genuine and Nominal Rates of Return on Nonfinancial 
Corporate Capital, and Tax Rates, 1948-73 
Percent per year 
Tax rate on corporate 
Genuine rate of return Nominal rate of return income 
Year 
Before 
tax (ri) 
After 
tax (r 2 ) 
Before 
tax (r 3 ) 
After 
tax (r 4 ) 
Genuine 
income 
Nominal 
income 
1948 
17.3 
9.7 
21A 
19.8 
43.9 
27.7 
1949 
14.5 
8.8 
16.2 
10.5 
39.3 
34.9 
1950 
16.7 
7.5 
20.6 
11.5 
55.1 
44.2 
1951 
16.5 
6.4 
22.4 
12.3 
r ^ 61.2 
45.1 
1952 
13.S 
6.0 
16.5 
8.6 
/ 56.5 
47.9 
1953 
13.3 
5.5 
14.5 
6.7 
/ 58.7 
53.8 
1954 
12.5 
6.2 
13.4 
7.0 
/ 50.4 
47.8 
1955 
15.5 
7.9 
18.0 
10.4 J 
1 49.0 
42.2 
1956 
13.4 
6.5 
18.2 
11.1 | 
51.4 
39.0 
1957 
12.2 
6.1 
15.9 
9.8 | 
50.0 
38.4 
195S 
10.4 
5.4 
12.1 
7.1 
48.1 
41.3 
1959 
13.0 
6.8 
13.9 
7.7 1 
47.7 
44.6 
1960 
12.0 
6.3 
12.3 
6.7 i 
i 
47.5* 
44.5 
1961 
11.8 
6.3 
12.0 
6.5 ! 
46.6 
45.8' 
1962 
13.5 
7.9 
13.9 
8.3 ; 
41.5 
40.3 
1963 
14.0 
8.1 
14.6 
8.8 1 
42.1 
39.7 
1964 
15.0 
9.1 
15.9 
10.0 ! 
39.3 
37.1 
1965 
16.3 
10.0 
17.8 
11.6 
38.7 
34.8 
1966 
16.1 
9.9 
18.6 
12.4 V 
38.5 
33.3 
1967 
14.0 
8.8 
16.9 
11.6 X. 37.1 
31.4 ' 
1968 
14.0 
8.1 
17.2 
11.2 
/ 42.1 
34.9 
1969 
11.6 
6.4 
16.3 
11.1 
S 44.8 
31.9 
1970 
9.1 
5.3 
14.1 
10.3 
C 41.8 
26.9 f 
1971 
9.6 
5.7 
13.8 
10.0 
! 40.6 
27.5 
1972 
9.9 
5.6 
14.7 
10.5 
)43A 
28.6 
1973 
10.5 
5.4 
15.3 
10.2 
48.6 
33.3 1 
Sources: The genuine rale of return is the genuine capital income divided by the net stock of capital, while 
the nomir.nl return is nominal capital income divided by the net stock of capital. All values are undeflated. 
The der.''ruinator for all calculations is the net stocks of all nonfinancial corporate capital, including an 
adjustment for valuation of government surplus assets, in current prices; the data are from Gorr^an. 
"Nonfirar.cial Corporations,” Table 3. 
The numerators are as follows: r x is Table 3, column (1), plus profits tax liabilities, from Table 2, column 
(5); r 2 is Table 3, column (1); r x is Table 3, column (4), plus profits tax liabilities; r 4 is Table 3, column (4). 
Since early 1971, the average weekly wage 
of production workers has risen by $27.97. 
But $5.32 went for additional taxes. And 
with inflation taking a huge bile, real spend 
able earnings dropped by about a dollar a 
week. Reported profits for nonfinancial cor 
porations rose $55 billion over the same 
span, but $34 billion represented inventory 
gains. And corporations paid taxes (labeled 
“Excess”) on these phantom profits. True 
profits, after adjustment for taxes, prices, 
and inventory gains, actually declined. 
jL 
<. 
Billions of dollars 
William D. Nordhaus 
Figure 3. Genuine and Nominal After-Tax Rates of Return on 
Nonfinancial Corporate Capital, 1948-73 
Percent per year 
PROFITS i 
Reported profits 
Inflation 
profits