A small mob (estimated by The Denver Post at 2,000 people, but looking on video somewhat less) marched Tuesday on Wells Fargo bank in Downtown Denver to protest, well, the fact that banks have money, we suppose. (The whole raw video is above for your inspection; we watched it so so you don’t have to.)
The Service Employees International Union (SEIU) has organized a number of anti-Wells Fargo rallies, most notably in Minnesota and San Francisco, complaining about their financing of private prison companies and their role in helping Fannie Mae and Freddie Mac to fulfill their missions of over-lending to would-be homeowners. But the claim used to rally the troops, the one that really feeds the beast of “unfairness,” is this one, repeated by Rev. Dawn Riley Duval of the Shorter A.M.E. Church:
“Wells Fargo recorded $69.1 billion dollars in U.S. profits; however, the effective U.S. tax rate paid by Wells Fargo was a pitiful 3.8%.”
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. They get there by claiming that the “current” component of Wells Fargo’s 2009 tax expense, a $4 billion credit, actually represents a refund from the IRS, or money returned to them by the government. Of course, it doesn’t.
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 election years following recessions, 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.
If you do watch the video, keep an eye out for Denver City Councilman Paul Lopez (District 3), who makes a calculator-impaired appearance towards the end, as well – turning Colorado’s “fair share” of $2.5 trillion [an amount purportedly owed by the richest 1 percent to the 99 percent] into a relatively paltry $53 million.
We here at WhoSaidYouSaid know there may be no power on earth, short of Frank Capra, capable of making banks into the objects of sympathy. But it shouldn’t surprise anyone when politicians and rabble-rousers eager to play “Barbarians at the Gate” lack math on their side.