How did changes in net interest income and proprietors’ income mechanically alter the corporate share of national income during 2020–2024?

1. The accounting mechanics: why net interest and proprietors’ income move the corporate share

National income is an additive accounting identity made up of employee compensation, proprietors’ income, rental income, corporate profits, net interest and miscellaneous payments, and other smaller items, so a fall in one component mechanically raises the share of others even if their dollar levels are unchanged; net interest is explicitly included as “interest paid less interest received and royalty payments” and proprietors’ income captures income of unincorporated businesses — both directly enter the national income pie that corporate profits are measured against ^{[5] [1]}. Thus, a decline in net interest or proprietors’ income reduces the denominator or reallocates income away from noncorporate recipients and into the residual share taken by corporate profits, making the corporate share appear larger in percent terms without requiring an equivalent pure “profit boom” in level terms ^{[5] [2]}.

2. What changed, 2020–2024: net interest fell, proprietors’ income moved unevenly

BEA and Federal Reserve analysis indicate the surge in corporate profits’ share that began in late 2020 was “mostly at the expense of a decline in net interest and miscellaneous payments on assets” and movements in proprietors’ income; corporate profits as a share rose from pre-pandemic levels to approximately the mid-to-high teens of national income by 2024 ^{[1] [2]}. Net interest declined early in the pandemic because interest receipts and payments shifted with disrupted markets and policy, reducing the net-interest line that sits alongside corporate profits in national income ^{[1] [5]}. Proprietors’ income also played a role: while some reporting finds proprietors’ income was relatively stable as a percent of national income through recent years, BEA’s annual updates and agency revisions — especially for farm proprietors and other sectors — produced upward and downward adjustments that changed how much of national income was allocated outside corporations ^{[2] [4] [3]}.

3. Measurement and revisions: BEA methods matter to the “mechanical” story

The BEA’s National Economic Accounts are periodically revised using new source data (IRS SOI, Census, FDIC, Compustat, USDA) and methodological choices that affect net interest and proprietors’ income estimates; for example, the 2024 annual update revised corporate profits and proprietors’ income upward for several years while also revising net interest, with those data-source choices directly altering the apparent corporate share ^{[3] [4]}. The NIPA handbook explains that net interest is included to ensure national income captures only production‑generated incomes and that allocation rules (such as how proprietors’ labor versus capital return is split) influence measured labor and corporate shares — meaning that part of the corporate share rise can reflect statistical reclassification rather than purely economic shifts ^{[5] [6]}.

4. Competing readings and the bottom line

One interpretation — emphasized by the St. Louis Fed and corroborated by FRED analysis — is that much of the post‑2020 corporate share increase is an accounting outcome of declines in net interest and some proprietors’ share, not solely an extraordinary surge in corporate profitability from underlying market power or productivity gains ^{[1] [2]}. Alternative views caution that revisions, sectoral concentration, and real increases in profits for domestic nonfinancial firms also contributed, so the mechanical story does not fully eliminate substantive profit growth as a factor ^{[1] [7]}. Available reporting documents the mechanical channel clearly but also shows that data revisions and the split between nominal-level profit increases and compositional shifts both mattered to the corporate share of national income during 2020–2024 ^{[3] [4] [1]}.