The following article byTory Newmyer was posted on the Washington Post website December 15, 2017:
At worst for Republicans, Sen. Marco Rubio’s opposition to their tax package sinks the bill. If he remains opposed, as does, say, Sen. Bob Corker (R-Tenn.), only one more Republican defection would mean failure. Much more likely, leaders reach an accommodation with the Florida Republican that satisfies his demand for expanding the child tax credit.
But at best, Rubio’s last stand is ensuring the tax debate concludes on a politically sour note for his party. His gripe, after all, is with the measure’s stinginess toward the working class even as it strains at the seams with goodies for corporations and the wealthy.
Indeed, other last-minute changes Republicans have been considering appeared primed to tilt the package further in that direction. At one point Thursday, as they scrambled to make the bill’s budget math work, Senate Finance Committee Chairman Orrin Hatch (R-Utah) said they were looking at moving up the expiration date for individual tax cuts — a change that would siphon more from lower-income workers. As my colleagues Jeff Stein, Erica Werner and Damian Paletta write in their latest report on the state of play:
“The additional revenue is needed because Republicans are seeking to lower the top tax rate paid by the wealthiest Americans, ratchet back proposed curbs on the deductions of state and local taxes, and scale back proposed tax rules for investment income. All of these changes are expected to add more than $200 billion to the cost of the bill, which is one reason GOP leaders have said they don’t have much flexibility to address Rubio’s demands.”
Rubio has explicitly presented the zero-sum choice his leaders have made to sweeten the deal for the wealthiest over the neediest. He reemphasized the point Thursday:
Tax negotiators didn’t have much trouble finding a way to lower the the top tax bracket and to start the corporate tax cut a year early. 1/2
Adding at least a few hundred $’s in refundable cuts for working families who seem to always be forgotten isn’t hard to do either 2/2
Polls show Americans mostly think the bill skews its benefits to the well-heeled. More than three-quarters of respondents to a CBS News survey this month said it would benefit corporations, while less than a quarter said it would help their own family (and 69 percent said it would help the wealthy.) And a USA Today-Suffolk University poll released Sunday found 64 percent said the wealthy will get the most benefits, while just 17 percent said the middle class will.
I wrote in this space yesterday about some of the dials Republican negotiators could twist to raise more revenue from corporate interests, eating into their benefit from the rate cut at the heart of the bill.
VIDEO HERE
For industries that pay a particularly high effective tax rate under the current system, however, the bill looks like a major win. Included in that group: big Wall Street banks. Richard Ramsden, who heads up coverage of the financial sector for Goldman Sachs, made the case in a new episode of the firm’s podcast, released Thursday. He said the tax bill was a major topic at a financial services conference he just hosted that brought investors together with finance executives:
“Banks, though, do benefit disproportionately in some ways in that 90 percent of bank earnings are domestic, and banks actually do have relatively high tax rates. So there was a very healthy debate around what is the impact of corporate tax reform going to be, not just on the banks themselves but on the broader economy … There’s obviously a lot of details that still need to be ironed out. But it would have a fairly significant impact on overall bank earnings, at least in the short run … On our estimates, you’ll probably see a 15 percent uplift, at least in the short run, in terms of the overall earning power of the sector.”
Jake Siewert, Goldman’s head of corporate communications and the host of the podcast: “So in other words, their tax rate drops from the low 30s down to 20, and it goes straight to the bottom line.’
Ramsden: “Yes, at least initially. Over time, the banking system is very competitive; banking is a very commoditized industry, so you would expect to see some of that benefit eroded through increased competition over time — but in the short run, it would have a material earnings uplift for the banks that we cover, at least.”
And what would banks do with the windfall? Some of it, Ramsden said, would be reinvested. And some would go to shareholders:
“There are shareholders who frankly would like to see some of the capital returned to them so that they can invest in other areas that are growing quicker. I do think what you will see as a first order is that banks will look to increase their dividend payout ratios. Again, if you look at the largest banks, their dividend payout ratios are between 30 to 35 percent. If you look historically, banks paid out closer to 45 percent of their earnings in the form of a dividend. And I do think over the next few years, banks are looking for opportunities to grow their dividends as a way of providing a better yield to shareholders.”
The assessment calls to mind the now-famous scene last month at the Wall Street Journal’s CEO Council meeting featuring Ramsden’s former Goldman colleague Gary Cohn, now the president’s top economic adviser. When a Journal editor queried the crowd of executives about how many would invest more if the tax bill passes, only a few raised their hands, prompting Cohn to ask, “Why aren’t the other hands up?”
Critics seized on the moment as a refutation of the argument from Cohn and others that the tax package’s benefits will trickle down to a broad base of Americans. In an opinion piece this morning, Bloomberg CEO Mike Bloomberg identifies Cohn as a friend and says he can answer his question: “We don’t need the money.”
The former New York City mayor continues: “Corporations are sitting on a record amount of cash reserves: nearly $2.3 trillion. That figure has been climbing steadily since the recession ended in 2009, and it’s now double what it was in 2001. The reason CEOs aren’t investing more of their liquid assets has little to do with the tax rate. CEOs aren’t waiting on a tax cut to ‘jump-start the economy‘ — a favorite phrase of politicians who have never run a company — or to hand out raises. It’s pure fantasy to think that the tax bill will lead to significantly higher wages and growth, as Republicans have promised. Had Congress actually listened to executives, or economists who study these issues carefully, it might have realized that.”
View the post here.