The Profit-Squeeze and Tax Policy: Can the State Actively Intervene?

Abstract

The argument that there will be an inevitable fall in the profit rate is most often made without reference to interventions by the state, which can use a myriad of instrument to offset a profit rate decline. In this paper I examine, by using intervention analysis techniques, the effects of changes in tax laws on the posttax profit rate in the United States. It is shown that changes in the tax laws thought to be favorable to capital did not have the desired effect of raising the posttax profit rates. Several explanations for this finding are suggested, all of which constrain the ability of the state to intervene in the market.