FOR IMMEDIATE RELEASE
December 20, 2017
Republicans Pass Deeply Unpopular and Harmful Tax Bill to Reward Wall Street Donors
Washington, DC – On Wednesday, House Republicans sent to President Trump a bill that lavishes over $1 trillion in tax cuts on the wealthiest, including Wall Street banks, 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 limited or temporary benefits, and in many cases will see their taxes increased, while millions are set to lose vital services like healthcare.
“The majority in Congress is making a corrupt bargain with Wall Street and wealthy elites,” said Lisa Donner, executive director of Americans for Financial Reform. “At a time when millions of everyday Americans are struggling with stagnant wages, Republicans decided to use the tax code to reward its contributors.”
“Polls have shown that the Republican tax bill is deeply unpopular. Voters recognize it for what it is: a giant holiday gift to Wall Street and the super rich that the rest of us will be paying off for decades,” said Porter McConnell, campaign manager of the Take on Wall Street campaign. “Not even the administration’s own Treasury department was able to offer an economic justification for gifting tax cuts to corporations and wealthy individuals.”
Among other giveaways to Wall Street in the 500-page bill, the tax legislation would have the following results:
- It would benefit big banks by slashing the corporate tax rate from 35% to 21% and cutting or eliminating taxes on foreign subsidiary income.
- Big banks will gain more than most other industries from the cut in the headline corporate tax rate. A new Goldman Sachs report predicts Wells Fargo will be the biggest winner from lowering the corporate tax rate to 21 percent. 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 close to $11.5 billion in 2016 at the proposed rate.
- The tax plan includes a massive giveaway to hedge funds and other Wall Street firms through a “pass-through” business tax cut. The bill would include a 20 percent deduction for pass-through businesses, which would lower the current top effective rate of 39.6 percent to below 30 percent. Some 70% of pass-through businesses are in the financial sector, and almost half of the increased income of the top 1% since 1980 comes from pass-through business income.
- The tax plan slashes tax rates on both the income and the inherited wealth of the richest Americans, many of whom are on Wall Street.
- The bill preserves the carried interest loophole 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, and saves an estimate $100 million a year as a result of this loophole alone.
- Real estate investment trusts (REITs) like the Trump Organization and Kushner Companies were also among the big winners of both tax bills. REITs allow people to invest in a bundle of real estate assets, and they don’t pay a separate business tax, but rather, the tax is passed on to shareholders, who pay taxes based on their individual returns. Both tax bills lowered the top tax rate on the “pass through” income that REIT shareholders pay. Meanwhile, those that receive mortgage-interest income outside a REIT would pay ordinary rates. This is an example of how the tax bills give different treatment to similar activities, opening the field up for tax gamesmanship.
- The bill gives 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.