U.S. Bancorp and TCF Financial, two of Minnesota's biggest banks, are giving bonuses to workers, increasing charitable donations and telling investors to expect lower tax expenses as a result of the new federal tax law.
U.S. Bank, TCF join banks that promises bonuses, higher pay after getting taxes cut
The huge financial complex will spend millions of its unspecified tax savings on employees and philanthropy but doesn't specify total expected savings or planned expenditures.
January 2, 2018 at 10:03PM
U.S. Bank also said Tuesday it would raise the minimum wage of its hourly employees to $15.
The companies join a list of large employers, particularly in the financial sector, to publicly declare that they will spend on workers some of the savings they anticipate from lower corporate tax rates in the law.
"We believe that tax reform is positive for the U.S. economy because it provides an immediate opportunity to benefit employees, communities and customers," Andy Cecere, chief executive of Minneapolis-based U.S. Bancorp, said in a statement.
The law cuts the top federal tax rate from 35 percent to 21 percent for corporations. Most large companies already reduce their tax rate through deductions and credits. U.S. Bancorp paid an effective tax rate of 29 percent before the new law was enacted, a spokesman said.
The company is on pace to pay $2.4 billion in income taxes this year, slightly higher than last year, after paying $1.8 billion through September. Its profit was $5.9 billion in 2016 and it paid out one-third of that in dividends to shareholders.
Before the new tax law, finance and insurance companies would have paid an effective corporate tax rate of 26.1 percent next year, according to the Associated Press. Now, it will be 14.3 percent.
Analysts at Goldman Sachs have estimated that the tax law will boost big-bank earnings per share by 13 percent next year. The top beneficiary will be Wells Fargo, which Goldman Sachs estimates will see an 18-percent earnings surge in 2018.
Wells Fargo, which has a large regional presence in the Twin Cities, is the state's largest federally insured bank by deposits, followed by U.S. Bank and TCF. Wells Fargo announced just after President Donald Trump signed the tax law that it will lift its minimum wage to $15 an hour and donate $400 million to nonprofit organizations.
In its announcement Tuesday, U.S. Bank said it raise its minimum wage to $15 an hour, pay a one-time bonus of $1,000 to nearly 60,000 employees and make a one-time contribution of $150 million to the U.S. Bank Foundation.
U.S. Bancorp also said it will invest in projects that will enhance its customers' experiences, such as digital-banking capability, "multicultural initiatives, back-office automation and brand building."
Meanwhile, Plymouth-based TCF Financial, a smaller, regional banker, said it preliminarily expects one-time benefit of $120 million to $140 million to account for the deferred taxes that it will now pay at a lower rate. The decrease to income tax expense will be reported when TCF reports 2017 results later this month.
TCF also said it will provide approximately $5 million in one-time bonuses to employees, $1,000 to full-time workers and $500 to part-timers. The bonuses will go to employees who earned less than $100,000 in 2017, about 80 percent of TCF's workforce.
Additionally, TCF will donate $5 million to TCF Foundation and double the matching contributions for charities to which its employees donate.
The $1.5 trillion tax cut created by the law spreads benefits across a wide array of American business. It also is projected by economists and others to drive up the federal debt by at least $1 trillion. Some analysts worry that companies will use the tax savings to benefit shareholders through stock buybacks and dividends, rather than driving the economy upward with innovation and investment.
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