Washington, DC – On Friday, Senate Republicans passed a bill with some $1.5 trillion in tax cuts, overwhelmingly weighted to the wealthiest Americans. The bill lavishes tax cuts on Wall Street banks, on executives who can manipulate their legal status to obtain a lower tax rate, and on operations in foreign tax havens. In contrast, ordinary Americans earning wages and salaries receive very limited benefits, and in many cases will see their taxes increased.
“This bill will make life more insecure for millions of Americans, while further rigging the tax code in favor of profitable Wall Street banks and wealthy private fund managers,” said Lisa Donner, executive director of Americans for Financial Reform. “If the tax code is an indicator of values, this bill says that regular people must work with no safety net in order to line the pockets of Wall Street moguls. We urge lawmakers to reject this approach and vote NO on final passage of the reconciled version.”
“With its army of lobbyists and millions in campaign contributions, the financial sector wants to help itself to an even bigger slice of the wealth pie,” said Luísa Galvão, a representative with the Take on Wall Street campaign. “This bill funnels wealth to the top 1% by giving additional tax breaks to profitable banks and creating new loopholes for wealthy private fund managers – masters of tax evasion. Our tax code should work for everyday people, not reward Wall Street manipulation. We urge lawmakers to vote NO on the reconciled version of this deeply damaging and unpopular bill.”
Among other giveaways to Wall Street in the 500-page bill – including some additional goodies added at the last minute – the Senate’s tax legislation would:
- Benefit big banks like Wells Fargo, which stands to be among the biggest winner of a provision to lower the corporate tax rate from 35 to 20 percent. Banks also got a last-minute gift: payments related to derivatives would be excluded in calculating bank tax bills, a major source of their income. The five biggest diversified U.S. banks (Wells Fargo, Bank of America Corp., Citigroup, JP Morgan Chase & Co., and U.S. Bancorp) would have had tax savings of something like $11.5 billion in 2016 at the proposed rate.
- Result in a massive giveaway to hedge funds and other Wall Street firms through a “pass-through” business tax cut. The amended Senate bill would raise the deduction for pass-through businesses from 17.4% to 23%, which would lower the current top effective rate of 39.6% to 29.6%.
- Include a new loophole that makes publicly traded private equity firms that get income from pass-through partnerships — like Blackstone, Carlyle, KKR, and Apollo — newly eligible for the 23% deduction on management fees.
- Preserve the carried interest loophole that Trump promised to close, which allows private equity and other Wall Street money managers to be taxed at a lower rate than nurses and firefighters. Retaining this loophole, along with the special gift for publicly traded PE firms is a handsome return on investment for private equity moguls like Blackstone CEO Stephen Schwarzman – who gave $2.57 million to Republican Senate candidates last year.
- Give a major tax break on capital gains to hedge fund managers who are residents of the Virgin Islands in the form of a 90 percent reduction in tax liability on their income. It has been estimated that this provision alone will cost over $600 million in lost revenue in the next decade.