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junk fees
What Mob Movies Teach Us About GOP Tax Policy
The Trump administration’s disastrous tax law paved the way for corporate America’s “mink coats and Cadillacs” moment.
Aug 22, 2024
In one of the more memorable scenes from the Scorcese mob classic Goodfellas, Jimmy scolds his co-conspirators for flaunting the spoils of their infamous Lufthansa Heist—the 1978 theft of $6 million in cash and jewels from New York’s JFK Airport.
“Didn’t I tell you not to get anything?” Jimmy snaps at Johnny, who had arrived at the Christmas party in a new pink Cadillac. Moments later, Frank walks in alongside a date donning a new mink coat, and Jimmy is incensed. “In two days, one guy gets a Caddy and one guy gets a $20,000 mink!”
The mob logic portrayed here—that when you hit a major lick, it’s best to lay low and not attract attention—seems innocent by the standards of the Trump administration’s signature heist: the 2017 Tax Cuts and Jobs Act (TCJA). That law paved the way for corporate America’s “mink coats and Cadillacs” moment by slashing the corporate tax rate from 35% to 21%—robbing the public of roughly $1.3 trillion and further enriching billionaires and top executives. In Goodfellas terms, that’s equal to 46,428 inflation-adjusted Lufthansa heists. And like Johnny and Frank, the corporations who scored the biggest windfalls have since done the opposite of lay low. They have instead gone on a years-long profiteering binge, rolling out some of the most egregious tactics to cash in even further.
In typical trickle-down fashion, the corporate rate cut was sold as a boon to workers and ordinary families. The Trump administration said the TCJA’s most expensive provision would boost wages to the tune of $4,000 per year. That promise, it turns out, was a fraud. According to a recent study, 90% of American workers received zero dollars from the TCJA’s corporate rate cut. Meanwhile, executive pay soared, and stock buybacks hit a record high $1 trillion in the year after it passed.
So what did the typical American family get if not a major boost in income? Junk fees, deceptive scams at the grocery store, price gouging, and major collusion scandals in everything from meatpacking to rentals to oil and gas. It can be said that the TCJA unleashed a greatest hits of predatory tactics by rewarding otherwise too-risky pricing schemes that push consumer loyalty to the brink. Lower taxes and record profits also mean more money to buy lobbying power in Washington to push for more tax cuts. In that way, our dangerously low-tax environment exposes all of us to the worst and riskiest corporate behavior.
Higher corporate taxation means fewer opportunities to hoard profits and rip off consumers, and more opportunities to invest in healthcare, child care, education, and jobs—the things proven to improve quality of life and democratize economic opportunity.
According to a February study from the Institute on Taxation and Economic Policy (ITEP), 342 profitable corporations paid an effective tax rate of 14.1% from 2018 to 2022, well below the 21% signed into law by the Trump administration. Layered onto decades of corporate tax cuts, the TCJA pushed the U.S. to the very bottom of the OECD in terms of revenue raised from corporations as a share of the economy. And Republicans are poised to go even further if former U.S. President Donald Trump retakes the White House.
A recent analysis from CAP Action found that Trump’s plan to cut the corporate tax rate even further to 15% would provide the top 100 U.S. companies with an additional $48 billion gift every year. This means even more breathing room to test out the next wave of ripoff schemes needed to satisfy investors. Whether it’s major credit card companies jacking up APRs even further, Amazon running more casino-style pricing experiments, or Tyson Foods deploying more algorithms to allegedly collude on meat prices, lower taxation offers a sweet incentive to profiteer at the expense of consumers.
Raising the corporate tax rate won’t fix everything that’s broken with corporate America or our economy. But it will fundamentally change the economic rules. Higher corporate taxation means fewer opportunities to hoard profits and rip off consumers, and more opportunities to invest in healthcare, child care, education, and jobs—the things proven to improve quality of life and democratize economic opportunity.
Since the Trump tax cuts, the largest corporations have flaunted their record profits like caddies and minks, bragging on earnings calls about the new tricks they’re using to raise prices on consumers. The era of tax heists must end if we are to stop them. The time to end it is now.
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Trump-Appointed Judge Halts Biden Rule Capping Credit Card Fees
"The U.S. Chamber got its way for now—ensuring families get price-gouged a little longer with credit card late fees as high as $41," one advocate said of the ruling.
May 12, 2024
A Trump-appointed judge on Friday delivered a win for big banks when he granted the U.S. Chamber of Commerce a temporary injunction halting a Biden administration rule that would cap credit card fees at $8.
The Consumer Financial Protection Bureau (CFPB) rule, which would have gone into effect May 14, could save U.S. consumers more than $10 billion each year. The decision to pause its implementation, issued by U.S. District of the Northern District of Texas Judge Mark Pittman, will cost ordinary Americans around $27 million each day it is in effect.
"In their latest in a stack of lawsuits designed to pad record corporate profits at the expense of everyone else, the U.S. Chamber got its way for now—ensuring families get price-gouged a little longer with credit card late fees as high as $41," Liz Zelnick, the director of the Economic Security and Corporate Power Program at Accountable.US, said in a statement.
"It's time the U.S. Chamber stops clogging the courts with baseless lawsuits designed to enrich corporate CEOs on the backs of working families—and it's time the judiciary stops legitimizing venue shopping from big industry."
The CFPB issued the rule on March 5 as part of the Biden administration's commitment to crack down on "junk fees." However, the Chamber of Commerce and other banking trade associations—including the American Bankers Association and the Consumer Bankers Association—quickly sued to block it. The executives of Bank of America, Capital One, Citibank, and JPMorgan Chase sit on the boards of the groups behind the suit, according toThe Washington Post.
"Banks make billions in profits charging excessive late fees," Sen. Elizabeth Warren (D-Mass.) wrote on social media Saturday in response to the ruling. "Now a single Trump-appointed judge sided with bank lobbyists to block the Biden administration's new rule capping these junk fees."
Accountable.US also criticized the fact that the suit was before Pittman at all, arguing that the U.S. Chamber of Commerce filed the suit in Texas federal court so that it would end up under the jurisdiction of the 5th Circuit Court of Appeals, which has 19 Republican-appointed justices out of a total of 26. The chamber has filed nearly two-thirds of its lawsuits since 2017 with courts covered by the 5th Circuit.
"The U.S. Chamber and the big banks they represent have corrupted our judicial system by venue shopping in courtrooms of least resistance, going out of their way to avoid having their lawsuit heard by a fair and neutral federal judge," Zelnick said. "It's time the U.S. Chamber stops clogging the courts with baseless lawsuits designed to enrich corporate CEOs on the backs of working families—and it's time the judiciary stops legitimizing venue shopping from big industry."
The 5th Circuit's treatment of the case has also come under fire, as Trump-appointed Judge Don Willett has not recused himself despite the fact that he owns tens of thousands of dollars in Citigroup shares. While Willett has argued that Citigroup is not a party to the case, it belongs to trade groups that are, and any ruling on credit card fees would significantly impact the bank. Collectively, all the judges on the 5th Circuit have invested as much as $745,000 in credit card or credit issuing companies, according to the most recent publicly available information.
Donald Sherman, Gabe Lezra, and Linnaea Honl-Stuenkel of Citizens for Ethics in Washington wrote: "Judge Willett's refusal to recuse, and the lack of transparency about the rationale, reinforces the need for more judicial ethics reform to ensure that everyday Americans and government agencies have a level playing field when they go into court against corporate interests."
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Biden Applauded for Fighting 'Billion-Dollar Rip-Off' With Proposed Junk Fees Ban
"It's a bad day for corporate monopolies," said one advocate.
Oct 11, 2023
Consumer advocacy groups on Wednesday applauded new efforts announced by the Biden administration to rein in banks and other companies that make billions of dollars per year charging Americans what President Joe Biden called "outrageous" hidden fees when they make purchases or use basic financial services.
Speaking in the Rose Garden at the White House, Biden said the Federal Trade Commission (FTC) has proposed a new rule that would ban businesses from charging "junk fees"—unexpected "service charges" and other fees that are revealed to a consumer just before an online purchase is finalized by ticketing companies, car rental agencies, and other businesses.
Biden said companies charge the fees "simply because they can" and that banning them will give households across the nation more "breathing room."
"These junk fees can add hundreds of dollars weighing down family budgets, making it harder to pay family bills," said the president. "These junk fees may not matter to the wealthy, but they sure matter to working folks in homes like the one I grew up in."
The proposed rule has a 60-day public comment period. If finalized, the FTC would be empowered to impose financial penalties on companies that don't make their products' full prices clear to consumers, and obtain refunds for people who are charged junk fees.
"Today's monopolists and other powerful private corporations are true experts in exploiting their leverage to rip off the American people, with the harm falling especially hard on the poorest, least educated, and least powerful members of our society," said Barry Lynn, executive director of the Open Markets Institute. "Today's announcement demonstrates that President Biden is truly serious about banning these outrageous and abusive tactics and forcing corporations to just tell the truth about their services and prices."
While many in the American public may have come to accept junk fees as a part of life, Faiz Shakir, interim executive director of the American Economic Liberties Project, said the charges—which companies have increasingly used over the past 30 years—"aren't just a nuisance; they're a billion-dollar rip-off squeezing nearly every American's wallet."
"With a new proposed rule today from the FTC to flat out ban junk fees across the economy," said Shakir, "the Biden-Harris administration is standing up for working families. From banking to credit cards, hotels to airlines, and healthcare to entertainment, big corporations all across the economy abuse their market power to nickel and dime working families and undermine fair competition."
The president also announced that the Consumer Financial Protection Bureau (CFPB) will require large banks and credit unions to provide basic services to consumers, such as account balances and information needed for applications, without charging fees.
"These fees are now illegal," said Biden.
The CFPB has taken numerous actions since Biden took office to protect consumers from unfair fees, and announced Wednesday that its work has brought bounced check fees down more than 86% since 2021, saving Americans—particularly low-income families—nearly $2 billion.
The bureau also said it has secured $140 million in refunds for people who were charged types of junk fees that are already illegal, such as surprise overdraft charges and multiple bounced check fees for one transaction.
With Wednesday's announcement, "once again, the Biden administration has stepped up for consumers," said Susan Harley, managing director of the Congress Watch division of consumer watchdog Public Citizen.
"Ending junk fees," she added, "will allow Americans to make better informed decisions about how to spend their hard-earned money."
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