Big Bank Tax Dodges Bankrupt States: Report Finds
Today, National People's Action and the Public Accountability Initiative releases the groundbreaking report, "Big Bank Tax Drain: How Wall Street Speculation and Tax Avoidance are Starving Public Revenues."
Wall Street banks caused the economic crisis that has left millions unemployed, foreclosed-on, and without prospects in the worst economy since the Great Depression. This crisis has, in turn, caused massive tax revenue shortfalls for the federal government and for state governments across the country: nearly $300 billion combined for 50 states in the years since the crisis began. To deal with these budget woes, politicians are cutting public spending: laying off teachers, attacking public sector workers, raiding pensions, closing hospitals, and eliminating essential services for children, veterans, and the elderly.
Raising revenue from the wealthy, bailed-out banks that caused the crisis would be a far more sensible way to address these budget woes. This report analyzes data from the latest financial filings by the six big banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley — to expose the ways in which they continue to avoid taxes and contribute to tax revenue shortfalls, rather than pay for an economic recovery that will put people to work, keep people in their homes, and preserve the safety net — for people, not corporations.
- This year Bank of America is receiving the "income tax refund from hell" — $666 million for 2010, according to its annual report filed in late February 2011. This is following a $3.5 billion refund reported in 2009. Bank of America's federal income tax benefit this year is roughly two times the Obama administration's proposed cuts to the Community Development Block Grant program ($299 million).
- Six banks — Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, Goldman Sachs, and Morgan Stanley together paid income tax at an approximate rate of 11% of their pre-tax US earnings in 2009 and 2010. Had they paid at 35%, what they are legally mandated to pay, the federal government would have received an additional $13 billion in tax revenue. This would cover more than two years of salaries for the 132,000 teacher jobs lost since the economic crisis began in 2008.
- Wells Fargo reportedly received a $4 billion federal income tax refund on $18 billion in pre-tax income in 2009, and paid 7.5% of its pre-tax income of $19 billion in 2010 in federal taxes. Its net federal income tax benefit for 2009 and 2010 combined, $2.5 billion, is equal to the Obama administration's proposed cuts of 50% to the Low-Income Home Energy Assistance Program.
- Banks use a variety of mechanisms to avoid corporate income taxes, including offshore tax shelters. 50% of the six banks' 1871 foreign subsidiaries are incorporated in jurisdictions that have been identified as offshore tax havens, such as the Cayman Islands.
- Bank of America operates 371 tax-sheltered subsidiaries, more than any other big bank studied, and 204 subsidiaries in the Cayman Islands alone, according to its latest regulatory filings. 75% of Goldman Sachs's foreign subsidiaries are incorporated in offshore tax havens.
- The banks' private banking arms also protect the wealth of rich clients from taxation through offshore investment strategies. Bank of America's wealth management arm encourages clients to register their yachts in foreign jurisdictions for tax reasons.
- Closing special tax loopholes on the financial sector and implementing sensible revenue-raising initiatives such as the Financial Speculation Tax could generate over $150 billion in federal tax revenue each year.