Goldman Showers Execs With $100 Million In Early Bonuses To Avoid Trump Tax Hit

Goldman Sachs has accelerated nearly $100 million in stock awards to top executives before the end of the year in order to avoid unfavorable changes in the new tax code, according to public filings posted Friday. 

The most sweeping overhaul of U.S. tax code in 30 years includes a provision which caps a corporate deduction for executive pay; under current law, corporations can deduct up to $1 million per executive's base salary, however there's no cap on deductions for performance-based pay, such as bonuses. 

Under the new provisions, both base salary and performance bonuses count towards to $1 million cap - which is why Goldman accelerated $94.8 million in bonuses originally scheduled for January, 2018. By paying the bonuses early, the bank will save money on its own tax bill.

Most of Goldman's executives received early payouts - including of course, CEO Lloyd Blankfein. 

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Lloyd Blankfein

In a similar move, Netflix also announced it would change its executive compensation plan for 2018 in response to the new Tax Law. The company said in a public filing posted Thursday that it's going to start paying some of its top executives higher salaries, and tie less of their compensation to performance, citing the law change.

Accelerated bonuses aren't the only thing at least temporarily grinding Goldman's gears about the new tax code. As we discussed yesterday, in a Friday 8-K filing with the SEC, Trump's "repatriation tax" is going to knock approximately $5 billion off the company's profits in Q4 2017 in the form of a one-time repatriation charge. 

[T]he enactment of the Tax Legislation will result in a reduction of approximately $5 billion in the firms earnings for the fourth quarter and year ending December 31, 2017, approximately two-thirds of which is due to the repatriation tax.

The remaining 1/3 of Goldman's $5 billion hit "includes the effects of the implementation of the territorial tax system and the remeasurement of U.S. deferred tax assets at lower enacted corporate tax rates," making it more difficult for them to deduct past losses from future tax bills.

Goldman, which is due to report fourth-quarter results on January 17, said: “The impact of the tax legislation may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions the firm has made, guidance that may be issued and actions the firm may take as a result of the tax legislation.”

Previously, Barclays estimated this change would  cost the bank around GBP1BN ($1.35BN).

Barclays said the change had reduced the value of its deferred tax assets and would result in an associated one-off charge of about GBP1bn after tax.

It is expected to drag Barclays full-year earnings further into the red. The bank lost #628m in the first nine months of the year due to write-offs related to pulling out of African ventures.

On the bright side, the US corporate tax rate has been cut from 35% to 21% with the new law, which supposedly will "trickle down" to ordinary Americans. In reality, all it will achieve is fund even more stock buybacks, and benefit, drumroll - Goldman Sachs. After all, the tax changes were overseen by treasury secretary, Steve Mnuchin - a 17 year Goldman vet who declared the bill to be "great for hardworking workers."

Comments

J J Pettigrew Dec 31, 2017 6:41 AM Permalink

how much got funneled to Cohen and Manuchin...or will be funneled?

The closed loop between Wall St and Washington......old game still works real good for some...

An Shrubbery Dec 30, 2017 2:07 PM Permalink

"I'm Mr. Bad Example, intruder in the dirt

I like to have a good time, and I don't care who gets hurt

I'm Mr. Bad Example, take a look at me

I'll live to be a hundred, and go down in infamy

Of course I went to law school and took a law degree

And counseled all my vlients to plead insanity

 

silverer Dec 30, 2017 1:50 PM Permalink

Why not make it one billion dollar bonuses, declare bankruptcy, then beg the government for interest free loans guaranteed by the taxpayer to start up the businesses again?

Bitcoin Independence Dec 30, 2017 12:56 PM Permalink

The tax bill is saving the majority of Americans money.  It just so happens that the wealthy own most of the stock and assets are in the least amount of debt so they will earn more.

If you really want to change the wealth structure and fat cats getting a disproportionate share of the pot, then it has to come from the Fed.  Cheap money means that these are all going towards stock options and buy backs.  As soon as the dollar isn't artificially pumped at low rates, corporations will actually have to start investing in themselves with real money again.

CompassionateC… Dec 30, 2017 11:46 AM Permalink

The comments on this article are absolutely appalling.  These people worked very hard and fully deserve their bonuses, which, quite frankly, I find to be VERY modest if not on the low side of what they truly deserve.  It's the white working class man who lives on easy street that really should be paying more.  I'm so sick of tRump and his blatant Nazism and anti-semitism!

hooligan2009 Dec 30, 2017 11:30 AM Permalink

remember all these "deferred tax assets" are earnings that have been offset for almost ten years against book losses arising from mark-to- market during the GFC.

all these "losses" have more than been made back and financial institutions have not been paying taxes on earnings since the GFC to the extent of these "deferred tax assets".

once again GS is engaging in tax arbitrage to the maximum possible extent. employees the same. bring forward tax arb gains and pay out in cash at lower tax rates.

all legal, all immoral - typical giant vampire quid - just the way it treats its clients.

DavidFL Dec 30, 2017 11:18 AM Permalink

Once again the BS runs deep and wide. Sure GS pays a tax on repatriotriation of cash, however, corporate cash flow is greatly enhanced.

yellowsub Chris88 Dec 30, 2017 2:40 PM Permalink

You mean the orthodox that collaborates with each other that milks the system and grows to buys more properties.  

There is a reason why the system is the way it is for some to take advantage better than others like everything else.

The typical FSA you're talking about is for themselves unlike the only group known to rip off collectively in much larger sums.

In reply to by Chris88

To Hell In A H… Dec 30, 2017 11:14 AM Permalink

Some people call this **winning**? lol Fuckers below 120 IQ, should be barred from the vote. Only a cabbage brain was unable to see through this tax plan.

It is the endorsing of policies like this that, that leave people like me in shit. Idiots who do not have the mental aptitude to critically think, or extrapolate, get a say and voice how we live.

Well, I'm sorry, but I do not like being led by the fucking stupid and just like the Hope and Change simpletons, I am forced to follow policy endorsed by the MAGA retards. The rich ALWAYS circumnavigate tax. ALWAYS! Fuck the Trumptards and the Breitbart dickheads.

alpha-protagonist Dec 30, 2017 11:05 AM Permalink

OR...the deep state is setting Trump up to take the heat for a market collapse. It's not that the market overheated because of speculation, no, it's because of Trump's tax credit. Then GS can short the market they helped create, on the way down again.

buzzsaw99 Dec 30, 2017 10:47 AM Permalink

a reduction of approximately $5 billion...

so they took bonuses based upon an implied tax rate of zero. i guess it's too late for shareholders to claw back that money.

PitBullsRule Dec 30, 2017 10:39 AM Permalink

Well I wouldn't worry about that, now that Goldman is running the government, that 100 million is pretty small potatoes.

Once you get your very own Dotard in the presidents slot, you can just about print your own money.