In its 2022 outlook investment bank JP Morgan foresees higher taxation both on high-income households and corporations in order to fund $4 trillion of pandemic spending and another $2 trillion budgeted for the coming 10 years.
“Personal tax rates for higher-income families are likely to rise, making asset structuring and planning more critical,” notes the report. “While the statutory corporate tax rate may stay the same, changes to global intangible income taxes and a corporate minimum tax will likely be a drag on earnings. However, corporate tax changes will probably not be enough to offset the earnings growth we expect from sales and operating leverage. We also do not expect that higher taxes would curtail business investment.”
According to the report US profits are at all time highs at 13% of GDP compared to approximately 8% in 2000 and household debt service reached an all-time low in 1Q21 at 8.2% of disposable income compared to the 40-year average of 11.1%.
The top 20% of earners increased their net worth by $17 trillion from December 2019 through the middle of 2021 and US consumers saved $2.5 trillion above the pre-pandemic trend. The report expects developed world consumers to drive demand growth through 2022 to beyond.
“The U.S. quits rate is at the highest level in the series’ history back to 2000, suggesting robust demand for labor (People generally quit their jobs when they feel confident of finding another.),” state the report’s authors. “Broadly, wages are up 4–5% year-over-year, the strongest pace since the mid-2000s, and the highest share of small businesses on record are planning on raising compensation. Importantly, wages are growing the fastest at the lowest levels of income.”