Investments and the Two Minutes’ Hate


I’m smart enough to realize that there’s no power on earth, aside from maybe Frank Capra, that can make a bank an object of sympathy.  But yesterday’s Two-Minutes’ Hate outside Wells Fargo’s main Denver office sure came close:

When the call went out, this was the focus on ProgressNow’s email:

Over the last four years, Wells Fargo’s federal income tax rate was just 3.8%–less than what nurses, firefighters, teachers and janitors pay–despite making some $69.1 billion in profit. If Wells Fargo had paid their fair share in federal taxes, Colorado would have received an extra $53 million–money to hire hundreds of teachers, nurses and firefighters.

The source for this claim seems to be a Citizens for Tax Justice report, claiming to show that Wells Fargo actually got back $680 million, on $49.4 billion in profit, from 2008-2010, and then applying the same methodology to 2011.

There are many flaws in the CTJ’s study, beginning with the idea that while the tax expense isn’t real, somehow its “current” component is more real than its “deferred” component. It’s a mistake that they have a history of making, especially in years following recessions and election years, when the difference between financial accounting and tax accounting depresses apparent tax rates. It’s a mistake that Megan McArdle and Fortune have caught the New York Times making as well.

Cash, on the other hand, is real. Cash represents an actual check that Wells Fargo wrote to the Federal government. So while the IRS wasn’t writing Wells Fargo a $4 billion check in 2009, the company’s Statements of Cash Flows do say that on $64 billion of net income, it wrote checks to the government for $11.7 billion over those four years. To the extent that this represents “real” taxes paid, it constitutes an 18% tax rate.

But here’s one of the most revealing claims:

“…’accelerated depreciation’ is technically a tax deferral, but so long as a company continues to invest, the tax deferral tends to be indefinite.”

And the problem with that is…?  Evidently “investment” only counts if it’s government “investment” in Solyndra, or if it’s the result of shakedowns by community “organizers,” like the ones on the streets yesterday, or the one the White House.  Wells Fargo claims a quarter-billion dollars a year in charitable and community giving, but of course, that’s them deciding what to do with their money, and if it doesn’t satisfy the avarice of SEIU organizers, or fall under their control, then it doesn’t count.

Remember: Progressively More Expensive, Progressively More Intrusive, Progressively More Restrictive.