Banks are Big Winner Under the New Tax Plan
When the foreclosure and economic crisis that started in 2008 started to come to an end, and the lives of Americans began to improve, it was time to take an autopsy of the American economy and figure out what happened and what went so wrong. A major cause was related to the greed, fraud, and deception perpetrated on the public by the banking system.
Yet, as has been widely publicized, there was relatively little repercussion for banks or their CEOs in the aftermath of the catastrophe. Sure, some failed in the collapse, but many others received millions in taxpayer money, and for the ones that survived, there were no criminal investigations into the bank’s behaviors—in fact, some bank CEOs became richer during the crisis.
Banks Get Richer
Banks are once again benefitting by recent tax cuts passed by the current presidential administration. Banks are benefitting by close to $29 billion as a result of tax cuts afforded to them by the new tax plan.
This is even though the banking industry’s net income rose this year by about $236 billion, which is an increase of 44%. Without the tax cuts, the banking industry would “only” have made $207.9 billion—which still would have been a record year for the banks.
Because of tax cuts, big business and bank’s effective tax rate—the rate that they actually end up paying after deductions—has shrunk to about 19%.
How are Consumers Doing?
Of course you can argue that as long as the entire country does well, maybe it’s OK that banks do better. So is the common man or woman doing better? As a country, the deficit, measured as a portion of GDP, rose from 3.2 to 3.9 since 2016 (the tax cuts were passed in 2017), and is expected to go over 4.0 by the end of 2019. More than $22 trillion has been added to the national debt.
Individually, stories abound about hard working Americans who used to get an income tax refund, who are now getting none under the new tax plan. The average tax refund is down, with a 16% drop in the number of tax refunds issued.
Banks meanwhile, in light of their record profits and record low taxes, are being urged to “maintain underwriting discipline and credit standards.” In common terms, this is just pleading to banks not to hand out subprime loans like candy, or look the other way on dubious credit applications, all of which lead to the last housing crisis.
Consumers Could Face Problems if Economy Goes Sour
For the first time since 2006, no bank failed in the year 2018. That is good news, but only if the benefits of thriving banks are passed on to consumers and homeowners. Because as we’ve learned, the minute things take a turn for the worst, it will be homeowners and consumers who will be the victim of banks’ unethical practices once again.
Are you in foreclosure? Banks are still going after consumers. At Jacobs Legal in Miami, we can help you with any foreclosure problems you may have.