U.S. banks raked in record profits thanks to GOP tax bill

Rebekah Entralgo

Rebekah Entralgo Reporter, ThinkProgress

The Republican tax bill helped U.S. banks gain an extra $28 billion in profits last year, according to new data released Thursday by the Federal Deposit Insurance Corporation (FDIC).

In total, the nation’s 5,406 federally insured banks took in $236.7 billion in 2018, a 44 percent increase of $72.4 billion from 2017. Without the Republican tax bill, the FDIC estimates 2018 profits would have been $207.9 billion.

“Once again, the banking industry reported a strong quarter. Net income improved on higher net operating revenue and a lower effective tax rate,” FDIC Chairman Jelena McWilliams said in a statement. “The current economic expansion is the second-largest on record, and the nation’s banks are stronger as a result.”

President Donald Trump and congressional Republicans marketed their bill, the Tax Cuts and Jobs Act, as a gigantic boon for the middle class — even promising the average family would receive a $4,000 pay raise. In spite of the economic boom in the corporate and banking sectors, the American middle class has been largely unaffected by the measure, which passed in December of 2017. Meanwhile, corporations and big banks are rolling in cash.

Hourly wages have basically remained stagnant while corporate profits have skyrocketed. While the U.S. economy added over 300,000 jobs in January, workers got what amassed to just a 3-cent hourly raise.

“Donald Trump said he would tax Wall Street and stop them from ‘getting away with murder.’ It was all a con,” Seth Hanlon, senior fellow at the Center for American Progress, told ThinkProgress in an email. “His tax plan shoveled tens of billions of dollars to Wall Street and the financial sector. At the same time, he’s rolled back the reforms to protect consumers and prevent another financial crisis. There is no clearer example of how he sold out American workers.” (ThinkProgress is an editorially independent project of the Center for American Progress Action Fund.)

The boom those in the financial industry talk about is largely attributed to the massive tax cut Republicans gifted corporations with their bill. Under the new tax law, the corporate income tax rate was slashed from 35 percent to just 21 percent, helping boost federal bank profits. Some big banks, however, pay an even lower rate. After the tax bill’s passage, JP Morgan Chase announced it expected to pay a tax rate of just 19 percent, a cut of nearly one third of what they paid the year before. Similarly, PNC Financial announced it will likely pay a tax rate of just 17 percent.

Because of the corporate tax cut, massive corporations like Amazon, which is valued at nearly $800 billion, will pay $0 in federal taxes this year. In fact, the company is expecting a federal refund of nearly $129 billion. This essentially puts Amazon at a federal income tax rate of -1 percent this year, after paying a federal rate of more than 11 percent from 2011 to 2016. This is the second year in a row that Amazon has not paid any federal taxes. The Institute on Taxation and Economic Policy (ITEP) suggests that this is due to a combination of the corporate tax cut and a loophole that allows corporations to avoid paying state and federal taxes on roughly half their income

“In fact, the Trump Administration and its congressional allies included lavish new giveaways such as immediate expensing of capital investments,” ITEP senior fellow Matthew Gardner wrote. “Multiple analysts scored the tax law as a huge revenue loser, giving away far more to big corporations in rate cuts than it takes in loophole-closers.”

The GOP heralded the passage of its tax bill as a huge win for workers, who would see their higher wages now that corporations have more freed up cash that would “trickle down” to employees. What has happened instead is a massive increase in stock buybacks for corporate shareholders. For the first three quarters of 2018, buybacks reached $583.4 billion, up 52.6 percent from 2017. The issue of stock buybacks has become so concerning that Sen. Marco Rubio (R-FL), who voted emphatically for the tax bill in 2017, is now proposing a fix that would aggressively tax buybacks.

Big banks followed suit, with 21 of the nation’s largest banks spending upwards of $152 billion on buybacks and dividends in 2018.

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Reposted from ThinkProgress

Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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There is Dignity in All Work

There is Dignity in All Work