S&P 500 Taxes Down 300 Basis Points Since 2007

Amid concerns that the S&P 500 (INDEXSP:.INX) is growing too quickly, and that price to earnings ratios are too high to be sustained, there may be room for more growth by companies improving their operating margins. According to Tobias Levkovich at Citi Research, margins have dropped in recent quarters and improving them could allow companies to meet investors’ ever growing expectations.

“There has been a key difference in margins of late that may not be as evident to many market watchers – operating profit margins have been slipping,” explains Levkovich. This fact has been obscured by climbing after-tax profits, but he says this is because effective tax rates are at their lowest point in years.

Tax...

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