Moneybox

Don’t Worry, Banks Are Paying a Lot Less in Taxes

The windows of a Bank of America branch.
Bank of America Corp. reported a higher-than-expected quarterly profit Tuesday as cost cuts and the strength in its consumer bank started to take hold.
Spencer Platt/Getty Images

While Republican congressional candidates may have some trouble campaigning on the 2017 tax cut bill, they do have one grateful constituency: America’s banks. More than half of the increase in bank profits is thanks to the new corporate tax cuts, the Federal Deposit Insurance Corporation said Thursday. In its quarterly report on the more than 5,500 banks it insures, the FDIC said that total profits were $60.2 billion from April to June, compared with $48.1 billion in that time period last year. Had tax rates stayed the same, the FDIC reported, the increase would have been only $5.7 billion, instead of just over $12 billion.

This should not be surprising. The Tax Cuts and Jobs Act slashed the corporate rate from 35 percent to 21 percent, and it also had an especially big effect on the banking sector, which tends to pay higher effective tax rates than other industries. Many of the biggest banks have seen large, immediate benefits from the new bill.

For example, Bank of America’s income tax bill in the first six months of this year has fallen $1.8 billion from the first half of 2017, and the rate dived from 32 percent to 19 percent. Its income before taxes grew $1.5 billion and its overall profits jumped $3.4 billion.

Bank of America was one of many banks and other companies to announce a large one-time bonus following passage of the tax bill — in its case, $1,000 payments to about 145,000 employees who made less than $150,000. Hey, it’s not a cool $3.4 billion, but it’s not nothing.