The nation's 10 largest banks could see their combined annual net income drop by more than $7 billion under Democratic presidential nominee Joe Biden’s corporate tax plan, according to a new report released Wednesday by S&P Global Market Intelligence.
Biden told CNN last week his tax plan includes raising the corporate tax rate to 28%, which would partially roll back the 2017 Tax Cuts and Jobs Act enacted under the Trump administration. That law slashed the corporate tax rate from 35% to 21%.
- The nation's top six banks have saved a combined $32 billion since the law was enacted, according to a Bloomberg analysis.
Banks were among the biggest beneficiaries of President Donald Trump's tax overhaul.
The nation's top six banks — JPMorgan Chase, Bank of America, Citi, Wells Fargo, Goldman Sachs and Morgan Stanley — posted earnings in January showing $18 billion savings in 2019, according to Bloomberg.
That’s a $4 billion increase from the $14 billion in combined savings they reported in 2018, as their average effective tax rate fell to 18% from 20%.
Banks had previously paid effective tax rates of around 30%, according to Bloomberg.
S&P Global calculated the $7 billion-per-year figure using the mean of equity analysts' estimates for 2021.
S&P Global also examined 209 publicly traded banks with at least three analyst estimates and found that a tax rate of 28% would reduce the space's aggregate annual income by $9.36 billion.
But several factors need to play out this November before banks would be forced to prepare for a major tax code change.
Biden would first need to win the presidency, and Democrats would need to win the Senate while keeping control of the House.
And if Biden does win the White House, he would need to follow through on his proposal.
"We need to always remember that politician promises on the campaign trail rarely come to fruition," Isaac Boltansky, an analyst for Compass Point Research & Trading LLC, told S&P Global.
Biden, however, has said raising the corporate tax rate would be a "day one" priority.
"And the reason I'd make the changes to corporate taxes, it can raise $1.3 trillion if they just started paying 28% instead of 21%," he told CNN. "What are they doing? They're not hiring more people."