As President Obama set about trying to build support Tuesday for his deal to extend all of the Bush-era tax cuts for two years, banking industry representatives were crossing their fingers that the bill could be quickly enacted before reduced rates expire at yearend.
Of particular concern for the financial services industry is the more than 2,300 Subchapter S corp. banks that are structured at the individual income tax-rate level. If the tax cuts did expire, their rates would rise by more than 4 percentage points to 39.6%, said Paul Merski, a senior vice president and chief economist for the Independent Community Bankers of America.
"I'm biting my fingernails as we speak," he said, about the dynamics of waiting for Congress to act before they adjourn for the year. "The whole reason to convert to Sub S bank is for the tax benefit."
Merski said that depending upon the mix of tax measures, the community banking industry could save as much as $500 billion over 10 years if all the expiring tax break provisions were extended, including breaks on capital gains and dividends.