By reviewing income tax footnotes in SEC filings of many Big Financial Corps, including Big Insurance Corps, it just amazes me of the whole-scale US federal income tax breaks that have been given to this industry. Clearly, Big Financial Corps lobbyists have been very effective with the US Congress over the years.
There are four tax breaks most Big Financial Corps have received. Of these four, there are two that clearly dominate in magnitude….Tax exempt investments and tax credits, predominantly earned on low income housing.
The US Government and the Fed have created an economic environment in which the cost of financing by Big Financial Corps is incredibly low.
And particularly given that even in this really low cost of financing environment, Big Financial Corps have still been so reluctant to make loans, it makes no sense to me that the US Congress permits these Big Financial Corps to make tax-exempt investments.
I call what the Big Financial Corps are doing here “piling on”.
And given how horrible the US housing crisis has been on homeowners, just how have all of these housing tax credits granted to Big Financial Corps worked out? Clearly, the only beneficiaries have been the Big Financial Corps granted these huge housing tax credits.
Anyway, below here are the four tax breaks in just the most recent year 2010 that each of the Big Financial Corps have taken advantage of.
..............2010 US Federal Income Tax Benefits Received From.....
...................................................................................Bank
........................................Tax.........Dividend.............Owned
......................................Exempt.....Income......Tax.....Life
....................................Invstmnts.Exclusions.Credits.Insur...Total
.................................................(in million of dollars).....................
Big Financial Corps
Bank of America(1)....NC....981.........................732..............1,713
JPMorganChase.........NY...597.........................920..............1,517
Wells Fargo................CA...283...........291.........577....223...1,374
Fannie Mae(2)...........DC....183..........................888..............1,071
Citigroup...................NY...883................................................883
Freddie Mac(3)..........VA...213..........................585................798
US Bancorp...............MN...214..........................462................676
PNC Fincl Services.....PA.....53............57..........175......73......358
Morgan Stanley.........NY...105..........................223................328
GE Capital Services....CT....................................291................291
BB&T.........................NC....125..........................105................230
Goldman Sachs..........NY...129............................90................219
Key Corp...................OH.....17...........................117......48......182
SunTrust Banks..........GA....74.............13............88................175
Fifth Third Bancorp...OH.....34...........................133................167
Regions Financial......AL.....23...........................102......33......158
Capital One Fincl(4)...VA...................................158................158
Bank of NY Mellon.....NY....85.............................66................151
Ameriprise Financial.MN....13.............69............33................115
American Express.....NY...113.................................................113
State Street Corp.......MA....75.............................27...............102
HSBC USA..................NY....12.............................86.................98
Santander Hldgs US....PA....26............................40.......19.......85
Comerica...................TX.....................................49.......15.......64
M&T Bank..................NY....32.............................30.................62
Huntington Banc........OH.....7.............................23.......21.......51
Marshall & Ilsley........WI....14.............................15.......16.......45
First Horizon Natl......TN.....................................24.......10.......34
Zions Bancorp............UT....22..............................9...................31
NY Community Banc..NY...10...............................6..................16
BOK Financial.............OK.....5...............................6........4.........15
Commerce Bancshs....MO....13...................................................13
Northern Trust............IL....11...................................................11
Total 33 Big Fincl Corps..4,352.........430.......6,060....462..11,304
Big Insurance Corps
AIG...........................NY...587.........108.................................695
Berkshire Hathaway..NE.....27.........477.................................504
Travelers..................MN...476...............................................476
MetLife.....................NY...242............................82................324
Hartford Fincl Svcs...CT....152..........154.................................306
Prudential Fincl........NJ....214............................58................272
Chubb.......................NJ....241................................................241
Allstate.....................IL....176................................................176
Lincoln National.......PA...105............................42................147
Loews.......................NY....85..................................................85
CNA Financial...........IL.....84..................................................84
UnitedHealth Grp.....MN....65..................................................65
WR Berkley................CT....63..................................................63
Cincinnati Fincl........OH.....36.............19.................................55
WellPoint(5).............IN.....53..................................................53
Progressive Corp(6).OH....19..............30................................49 Cigna(7)...................PA....34..................................................34
Genworth Fincl........VA....32..................................................32
HCC Insurance(8).....TX....27..................................................27
Humana...................KY....24..................................................24
Torchmark...............TX......3.............................13..................16
American Fincl Grp..OH....16..................................................16
Assurant..................NY.....8................5.................................13
Principal Financial...IA......3..............10.................................13
Total 24 Big Insur Corps.2,772........803..........195.....0....3,770
Total 57 Big Financial &
.....Insurance Corps.......7,124......1,233.......6,255..462...15,074
It should be pointed out that the tax break on the Tax Advantaged Investments shown above is just the 35% tax rate on tax exempt income, as is disclosed in these companies’ income tax footnotes. The real tax cost here to the US government would be much higher than the amounts shown above, since the interest yield on taxable investments is substantially higher than that on tax exempt investments.
Yeah, that’s right, $15.1 bil of US federal income tax breaks in only one year.
My proposal here is to eliminate all four of these tax breaks given to Big Financial Corps.
Let me project the positive CBO scoring on this, just for the above Big Financial Corps.
I’ll start with the $15.1 bil of 2010 total tax breaks. And for the Tax Exempt Investment tax break, I’ll gross it up to convert it to the tax receipts on taxable investments. And I’ll assume the total tax breaks grow by 5% per year.
For the ten years 2012 to 2021, the positive CBO scoring is $262 bil. For the second ten years 2022 to 2031, the positive CBO scoring is another $427 bil.
The actual numbers will be much higher due to several factors. First, my numbers are just for the Big Financial Corps that I found, and there are many others. And second, the interest rates are extremely low now, and shouldn't continue like this for the entire long-term CBO scoring period.
And if it were concluded that the above tax breaks closed would also apply to Non-Financial Big Corps, then the positive CBO scoring would be substantially higher than the above numbers.
All of the tax proceeds under my proposal here should be used to reduce the US Deficit.
And it is very difficult for me to understand how the US Congress would require a reduction of Medicare benefits in lieu of closing these egregious tax loopholes of Big Financial Corps.
