The Public’s View of After-Tax Corporate Profit Margins

A commonly held erroneous viewpoint may cast a long shadow on public debate

By J. Richard Fredericks, Main Management

A poll was taken by Reason-Rupe in 2013 which asked folks “what percent profit on each dollar of sales do you think the average company makes after taxes?” The American public continues to be wildly off the mark about the level of after-tax margins.

The chart below delineates the results for the 2013 poll which shows that the public’s guesstimate is 36%.

Public's View of After-Tax Corporate Profit Margins

According to data from the New York University database (updated January 2018) of 7000 US companies (see here), the average profit margin is 7.9% for all companies and 6.9% for the 6,000+ companies excluding financials. ORC International has done very similar polling and in the 9 previous polls taken by them between 1971 and 1987, the typical margins the public cited ranged between 28% to 37% with an average of 31.6% – again, wildly off the mark but consistently high!