Tax Day 2018: Big Banks Already Reaping Huge Benefits From Trump's Plan

Tuesday at midnight is the deadline for millions of Americans to file their taxes for 2017, the last year before sweeping changes to the U.S. tax code went into effect in January. So while American taxpayers are seeing news reports of better than expected earnings for big banks, thanks in part to lower corporate tax rates, most won't see a tax cut of their own until they file their 2018 taxes in a year.

President Donald Trump signed the $1.5 trillion tax cut, the largest reorganization of the tax code in a generation, into law on December 22, 2017. The law gave tax breaks to individual and joint filers, including lower rates and a larger standard deduction, and also slashed the top corporate tax rate from 35 to 21 percent. Those new rates went into effect on January 1, 2018.

That change gives corporations, which typically pay their taxes every quarter, a more immediate indication of the tax law's benefit than individual and joint filers, who usually pay their taxes at the end of the year. Both corporations and individuals are operating under the new tax regime in 2018, but the differences typical filing schedules make corporate benefits apparently early. (Some individuals, most notably freelancers who don't receive W2s from an employer, also file quarterly.)

Bank of America reported record-breaking quarterly earnings on Monday. Filings show that the company reported $1.4 billion in tax expenses in the first quarter of 2018, more than $500 million less than it reported in the first quarter of 2017. On Friday, Citigroup reported its income tax fell $400 million compared to the first quarter of 2018.

Other big banks, including Wells Fargo, Citigroup, J.P. Morgan and Goldman Sachs, all filed quarterly earnings reports over the last few days that bested analyst earnings estimates.

But it's not just visibility that's different between the corporate and individual rates. The benefits are also widely divergent.

For example, while the new personal tax rates are temporary, and set to expire in 2025, the new lower corporate rate is permanent. So while all average individual taxpayers will see an after-tax income bump of 2.2 percent in 2018, according to an analysis by the nonpartisan Tax Policy Center, that benefit changes over time. The Center estimated that 5 percent of taxpayers would pay more tax in 2018, 9 percent in 2025 and 53 percent in 2027. That same year, corporations will continue to enjoy a $50 billion tax cut, according to the Joint Committee on Taxation. Congress, however, could extend the individual tax cuts when they are scheduled to expire.

While the corporate and individual tax breaks apply to different entities, many supporters of the tax law have argued that corporate tax cuts will enrich workers. But a new analysis by the progressive group Americans for Tax Fairness found Fortune 500 companies are "getting 10 times as much in tax cuts as they are giving to workers in one-time bonuses and wage hikes." The analysis also found those companies were spending "36 times as much on stock buybacks as they are spending on workers' bonuses and wages."

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Today's #TaxDay is out with the old, and in with the new. #TaxReform is working for American families.

— Leader McConnell (@senatemajldr) April 17, 2018