Here's How Much Money Bank of America Has Saved From Trump's Tax Cuts - Motley Fool

The Tax Cuts and Jobs Act, which is often informally referred to as the "Trump tax cuts," included many provisions, such as doubling the standard deduction, eliminating several itemized deductions, and doubling the Child Tax Credit, just to name a few. However, one of the most significant changes to the U.S. tax code during the Trump administration was the part of the Tax Cuts and Jobs Act that changed the corporate tax cut.

To be sure, there are many companies that were not affected much by the change. For example, many rapidly growing companies (including some of the tech giants) don't have much taxable income on a consistent basis, so it doesn't matter too much what the corporate tax rate is in these cases.

On the other hand, there are some companies and industries that have saved a lot of money because of the corporate tax cut, and the financial sector has been one of the biggest beneficiaries. In this article, we'll dig into Bank of America's (NYSE:BAC) results over the past several years to see just how much the company has saved under the Trump tax cuts.

Image source: Getty Images.

The corporate tax cut: The 30-second version

The Tax Cuts and Jobs Act made two significant changes to the corporate tax code. Prior to 2018, there were eight different marginal corporate tax brackets with rates ranging from 15% to 39%. The new tax legislation simplified this to a single flat rate.

Second, the Act dramatically lowered the rate that corporations pay to a flat rate of 21%. Corporate profits in excess of $75,000 were previously taxed at rates of at least 34%, so this is a big reduction for all but the smallest corporations.

How much did Bank of America save?

Looking through some of Bank of America's annual reports, here are the bank's effective tax rates in the years prior to the Tax Cuts and Jobs Act:

• 2014: 29.5%
• 2015: 28.3%
• 2016: 28.8%
• 2017: 31.1% (excluding one-time impact of tax reform)

Based on this information, the average effective tax rate the bank paid in the four years before the corporate tax reform was 29.4%. Here's how things have looked since then:

Metric	2018	2019
Income before taxes	$34,584	$32,754
Income tax expense	$6,437	$5,324
Effective tax rate	18.6%	16.3%

Data source: Bank of America annual reports. All figures are in millions of dollars, except effective tax rates.

Even though we're three quarters into 2020, it's difficult to judge tax savings as the bank's earnings have been dramatically impacted by the COVID-19 pandemic, including a net loss in the first quarter.

So, based on the information in this table, in the two full years since the implementation of the Tax Cuts and Jobs Act, Bank of America has paid an effective tax rate of about 17.5% on a total of $67.34 billion of pre-tax income. Based on the bank's 29.4% average effective tax rate prior to the tax cut, we can estimate that the Trump tax cuts saved Bank of America a total of just over $8 billion in the two full years since the lower corporate tax rate went into effect.

Just an estimate

First off, this isn't intended to be a political discussion. There are certainly arguments to be made both for and against the corporate tax cut as it currently stands. The point here is to quantify just how much money Bank of America has been able to keep because of the reduced corporate tax rate.

And it's also important to point out that this is just an estimate. Nobody has a crystal ball that can predict what would have happened if the Tax Cuts and Jobs Act hadn't been signed into law. The U.S. economy could have evolved quite differently, which would have likely affected Bank of America's business, which would have also influenced its tax liability. The $8 billion figure discussed here is just a best estimate based on how much the bank was paying before and after the new tax laws went into effect.

At any rate, it's fair to say that the answer to "how much has the corporate tax cut saved Bank of America?" is "billions."

Let's block ads! (Why?)

"much" - Google News
November 01, 2020 at 06:48PM
https://ift.tt/2TGwS2W

Here's How Much Money Bank of America Has Saved From Trump's Tax Cuts - Motley Fool
"much" - Google News
https://ift.tt/37eLLij
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update

Bagikan Berita Ini