Remember when many of the United States’ leading banks were pledging to expand their workforce and offer Americans increased access to financing? All they wanted in exchange was billions of dollars in tax cuts. Well, major banks got their tax cuts, to the tune of $21 billion. In exchange, they have eliminated jobs and have actually reduced lending.
Tax savings even turned out to be greater than expected for many banks. Yet much of that savings was either paid out in dividends to shareholders or used for stock buybacks. There were some bright spots. Bank of America handed out $1,000 bonuses to 145,000 staff members. However, BoA also trimmed its workforce by 4,900 workers. Wells Fargo boosted its minimum wage to $15 but also reduced its headcount by 4,000. Citigroup eliminated another 5,000 jobs. (Some of these jobs may have been outside of the United States.)
In 2016, banks paid a tax rate of roughly 28 percent. In 2018, that tax rate dropped to about 19 percent. The end result? Banks got to keep billions more dollars in their coffers. When Congress was moving towards tax reform, many business leaders promised that the money saved would be used to expand their workforce and award their workers with bonuses.
The theory sounds nice. If a company has more money, why wouldn’t they invest it? Yet business decisions are more heavily influenced by market forces, not how much cash is on hand. A company will only expand its workforce if it is profitable to do so. Likewise, a company will cut jobs if it’ll save them money, even if there is no pressing need for said money.
The end result? A deficit that continues to explode and a tab American taxpayers will have to pick up. Given all of the above, one might wonder if middle-class taxpayers and future generations should be paying for today’s egress.