America’s biggest banks significantly slashed their tax bills as a result of the Republican tax cuts of 2017. But workers and customers were largely excluded from that windfall.
According to a recent Bloomberg report, the 23 biggest banks in the U.S. — including giants like Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — saw their average effective tax rate drop by approximately ten points since 2016, prior to the changes to the tax code. The collective savings amounted to approximately $21 billion for those six banks.
But despite the savings from the tax cut, and despite the fact that President Trump and Republicans promised that corporations would use the extra money to grow jobs and investment in America, big banks largely ignored their workforces. Bloomberg estimates that the biggest banks have since eliminated approximately 4,300 jobs apiece (Citigroup eliminated 5,000 jobs) and cut lending to customers. Several thousand more job cuts may be likely in 2019. So where did all the extra money go?
According to Bloomberg, those 23 banks increased dividends to shareholders and stock buybacks by 23 percent since the passage of the 2017 tax cuts. And as Grit Post has previously reported, corporate stock buybacks are meant to take shares off the market and drive up the value of shares, which many corporate executives have as their primary form of compensation. Aside from big banks, American corporations as a whole spent more than $1 trillion on stock buybacks last year, setting a new record. 2019 buybacks are expected to rival last year’s record.
Senators Bernie Sanders (I-Vermont) and minority leader Chuck Schumer (D-New York) penned an op-ed for the New York Times this week calling attention to their bill that would limit stock buybacks without companies first demonstrating an investment in providing their workers with better pay and benefits. Former Goldman Sachs CEO Lloyd Blankfein took to Twitter after a seven-month break to complain about the proposal. Sen. Sanders clapped back from his own account.
“The money doesn’t vanish, it gets reinvested in higher growth businesses that boost the economy and jobs. Is that bad?” Blankfein tweeted.
“Blankfein… is correct that the money from stock buybacks ‘doesn’t vanish.’ It increases the wealth of billionaires like him. Instead of making the very rich even richer, how about increasing wages for American workers. Is that a bad idea?” Sanders responded.
A company used to be encouraged to return money to shareholders when it couldn't reinvest in itself for a good return. The money doesn't vanish, it gets reinvested in higher growth businesses that boost the economy and jobs. Is that bad? https://t.co/sxfcmve0DA
— Lloyd Blankfein (@lloydblankfein) February 5, 2019
Lloyd Blankfein, the former CEO of Goldman Sachs, is correct that the money from stock buybacks “doesn't vanish.” It increases the wealth of billionaires like him. Instead of making the very rich even richer, how about increasing wages for American workers. Is that a bad idea? https://t.co/FpIGQW9IZC
— Bernie Sanders (@SenSanders) February 5, 2019
Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.