August 20, 2022 / VOLUME NO. 223

No Longer the Villain

When President Joe Biden signed the Inflation Reduction Act into law Tuesday, it wasn’t just a victory for the Democratic Party. It was a minor victory for banks. 

Why do I say that? After all, the measure aims to increase taxes through a new 1% share buyback excise tax that applies to all publicly traded companies. Banks buy back their shares often, so this will inevitably impact them, says R. Scott Siefers, managing director and senior research analyst at Piper Sandler & Co. 

In addition, the law imposes a minimum 15% corporate tax on companies that earn more than $1 billion annually. That is unlikely to have a huge impact on banks. Most already pay at least 15% on corporate taxes since the official corporate tax rate is 21%, Siefers says. U.S. banks qualify for few deductions compared to other industries and don’t usually park their money abroad to avoid paying taxes.

But what’s striking about the law is that it doesn’t go after banks specifically, says Ed Mills, managing director of Washington policy for Raymond James Financial. Instead, the target of Washington ire has moved away from banks to tech companies, which sometimes pay little to nothing in corporate taxes. That industry is the true target of the 15% corporate minimum tax. 

“It’s a victory for banks to go through a major piece of legislation and not be the target of any major provision,” he says. He should know. He served for years for Democrats such as U.S. Rep. Carolyn Maloney, D-N.Y. He also worked on a subcommittee of the U.S. House Committee on Financial Services in 2007-08 that was instrumental in bringing about the Dodd-Frank Act, one of the most substantial pieces of legislation for the banking industry in decades. “[Banks] just aren’t the villain they used to be,” Mills says. He cites banks’ participation in the Paycheck Protection Program and says they performed well during the ultimate stress test, Covid-19.

The Inflation Reduction Act isn’t a huge victory for banks when it comes to taxes. On the other hand, it could have been worse. The industry’s reputation has substantially improved in the last several years, and that’s a good thing. 

Naomi Snyder, editor-in-chief for Bank Director

RankingBanking: The Best Banks

Bank Director ranks all 300 of the largest publicly traded banks in the country and profiles some of the top performers. 

“There are multiple ways of making money in the banking market. … It’s trying to find what the key to your success is and then sticking to it.” — Rick Childs, Crowe LLP

• Naomi Snyder, editor-in-chief for Bank Director

• Emily McCormick, vice president of research for Bank Director

How Banks Can Benefit From Adopting Automation for Month-End Close

Bank accounting teams can save time and prevent mistakes by automating their month-end close.


How Banks Can Create Financially Savvy Communities

For banks, customer financial wellness is both a challenge to meet and an opportunity to seize.

How Technology Fosters Economic Opportunity and Success

Actively creating tools and programs that promote financial inclusion for historically underserved populations may be the key to long-term resilience for community banks and their markets alike.

Capital One’s Secret to Success

Capital One is a perennial top performer in Bank Director’s RankingBanking analysis, sponsored by Crowe LLP and compiled by Piper Sandler & Co.