So Trump wants to fix the “broken” tax system. Lowering corporate income taxes are his first piece of business, pun intended. We probably could have guessed that Wall Street was going to be the biggest beneficiary of these cuts, along with Trump himself.
But most of us didn’t guess the proposed tax cuts would be this drastic.
This week, the Senate voted to move forward with debating the Trump budget resolution, and it’s rough. Trump wants to lower the tax rate from 35 percent to a low of 15 percent, though other Republicans have aimed towards a slight higher rate of 20 percent. And since tax cuts can move via the budget process, unlike other regulations, only a simple majority is needed to pass these measures. Republicans are in the catbird seat.
Point blank: Big banks are going to be the ones who gain the most from these proposed cuts, not the middle class.
Mega-banks, such as Wells Fargo, and JPMorgan Chase, will see their net profits increase by 15% and 14% respectively. In 2017 alone, if these rates dropped even to 25%, banks’ profit could grow by 20%. Whatever dollar amount you’re thinking, you’re probably too low: this is billions of dollars these banks would get to keep, dollars that should be going to the public. Imagine the kinds of things we could pay for with a few extra billion in our budget. Imagine the kinds of things you could pay for if you got to keep that much more of your paycheck.
The best part of it all? When asked to comment on these huge increases in profit, absolutely ZERO banks commented. Probably because their mouths were too full of celebratory champagne and caviar (do rich people still eat caviar?).
But why would banks’ profits soar so much more than other corporations, who are already making out like bandits? Because banks get to play by special rules that us plebes wouldn’t understand; they can deduct the interest they pay on deposits and other debt from their income, which makes less of their income taxable. And that, of course, then reduces the taxes they pay.
To be fair, there have been proposals to eliminate these deductions as a part of the new rule. But not so fast: former Goldman Sachs executive Steven Mnuchin (aka the Treasury Secretary) is advocating against those eliminations. Who could have guessed? Mnuchin specifically has been persistent about that, because losing those special rules would be a huge loss to Wall Street and the real estate industry; people like Mnuchin might have to give up whatever they do with those almost unthinkably huge paychecks.
Along with Cohn and Mnuchin, Trump has defended his cuts by saying, “It’s not good for me, believe me.” If Trump said it, it’s a safe bet the opposite is true: Trump being a real estate man, he will of course receive great benefits from these cuts if the deductions are kept in place. Essentially, Trump’s law is making himself richer. It’s pretty pathetic that the King of Deals had to literally become the most powerful person in the world before he made a business move that actually worked.
Proponents of these cuts, Cohn and Mnuchin specifically, are trying to paint a pretty picture to politicians about of how the middle class will truly benefit from this too. These people seriously think we’re still buying this “trickle down” lie; the worst part is that a lot of us are.
The Treasury Department of Tax Analysis in 2015 found that the corporate tax burden on the middle class was a low 19%. Translation: these corporate benefits aren’t benefiting any of us. It is demonstrably true that even though banks are already making a ton of money, wages and jobs have not seen huge increases. So where is the middle class’ benefit that Trump keeps going on about? There really is none.
See big picture? Big banks will reap the greatest benefits. Like they always do.