Hovde’s money is at the center of a Senate race that should be about middle class prosperity, not his own.

The California bank owner has received several significant tax breaks from former President Trump’s 2017 tax law. If elected, Hovde could improve his windfall through budget cuts or higher middle class taxes—write bank regulations, and never answer questions about foreign government deposits in his bank.

Lost in the campaign noise about Taylor Swift, migrants, crowd sizes, and former President Donald Trump’s criminal trials is a greatly underreported challenge facing the winner of the November election: defusing a fiscal time bomb that threatens massive tax hikes in just over a year. The team in the White House will have to work with Congress on a significant tax overhaul—and Eric Hovde, the candidate for a Wisconsin US Senate seat, stands to benefit significantly if he’s elected and Republicans are in control.

Examinations of Hovde’s past records and statements shared with UpNorthNews show that his Sunwest Bank reaped millions in tax cuts from Trump’s signature legislative achievement, the 2017 Tax Cuts and Jobs Act (TCJA)—and a special tax break demanded by Sen. Ron Johnson was good to Hovde’s real estate business. 

Hovde has called it “critical” to extend the TCJA cuts, even though they were extremely more beneficial to banks and wealthy investors than to middle class Americans. As senator, Hovde could be a pivotal swing vote in a plan that protects his interests while either raising taxes on the middle class or cutting vital services to make up for an estimated $5 trillion in budget deficits if the TCJA were renewed as is.

Signed into law by Trump in December 2017 after passing Congress with no Democratic votes, the TCJA was described by the Washington Post as a “sweeping measure [that] imprints a clear conservative vision on the tax code that will affect nearly every household and business. Corporations will see a massive tax cut, while most Americans will see temporary savings of various sizes. And in a move that may prove politically perilous, Republicans delivered the biggest gains to the wealthy.”

Corporate Taxes Plunge

The corporate tax rate plunged from 35 percent to 21 percent. Top earners saw their tax rate reduced from 39.6 to 37 percent. But any tax relief for the middle class was timed to expire after Trump was out of office—by 2027, more than half of all Americans (53%) would pay more in taxes and 83 percent of the bill’s remaining benefits would go to the top one percent of earners. And in Wisconsin, lower- and middle-income residents — about 60 percent of the state’s population — is forecast to pay around $200  more in taxes by then, according to the Institute for Taxation and Economic Policy.

Meanwhile, Hovde was living in Laguna Beach, California, in a $7 million hillside mansion that overlooks the Pacific Ocean, about a 15-mile drive from Sunwest Bank, which records show paid $3 million less in income taxes in 2018 and 2019, after the TCJA benefits kicked in. 

Massive Stock Buybacks, Not Reinvestments

Republican supporters of the Trump tax plan claimed corporations would use the massive tax savings to make capital improvements, raise workers’ pay, provide more training, invest in research and development, and give more to charity. Instead, while companies in the S&P 500 did spend about $5.5 billion on bonuses and wage hikes, another $171 billion went to stock buybacks which disproportionately benefit the very wealthy who are more likely to own many more shares than an average investor or employee.

In 2019, Sunwest converted $2.5 million of capital stock—and another $1.38 million in 2020. In 2021, the bank declared $15 million in cash dividends on common stock, again benefiting the largest shareholders, such as bank executives. In four of the five years prior to the TCJA, Sunwest did not declare dividends—showing the new habits were likely a direct result of Trump’s legislation that boosted overall bank profits a whopping 44 percent in the law’s first year.

“The Trump tax cut borrowed a lot of money and gave it to corporations,” said Aaron Klein, a fellow at the Brookings Institution and a former official in President Barack Obama’s Treasury in Politico. “Banks were some of the biggest winners.”

“At Sunwest, we decided to reinvest a portion of the tax savings in our people,” said Sunwest Bank President Carson Lappetito to the Orange County Business Journal in 2018. “In banking, the biggest asset is talent, and we are focused on acquiring, retaining and grooming the best talent.” It was not clear from a review of records what portion of that reinvestment went to executives as opposed to workers ranging from tellers to guards to maintenance workers.

Johnson’s LLC Giveaway Keeps Giving

Another part of the TCJA delivered a windfall to the operators of Limited Liability Corporations (LLCs) designed as “pass-through entities.” In pass-throughs, the company does not pay a corporate income tax—the individual owners count the company’s proceeds as personal income and then pay personal income taxes on that amount.

Trump’s tax bill was nearly derailed by one of the Senate’s wealthiest Republicans, but only until Ron Johnson won a provision that lowered the pass-through tax rate from 30 percent to 25 percent. Johnson has acknowledged the change benefited him personally. An investigation by ProPublica showed how some of Johnson’s wealthiest campaign donors—billionaires Dick and Liz Uihlein of packaging company Uline and roofing company owner Diane Hendricks—may have received a half-billion dollars in lower taxes over the life of the TCJA. Before and after the TCJA, the Uihleins and Hendricks have put tens of millions of dollars toward political committees that helped Johnson win elections.

Hovde Properties, as an LLC, also stood to benefit from the pass-through sweetener. With Hovde’s personal wealth estimated as high as $552 million, he would certainly qualify for the group of roughly 200,000 Americans with annual incomes of $1 million or more who received a total of $17.4 billion in lower taxes from the pass-through break. 

“President Trump brought, you know, tax rates down for small and medium sized businesses, which, by the way, are going to lapse here in a couple of years,” Hovde said earlier this year. “And that’s why it’s going to be critical, again, to take back the Senate and get control of the presidency and the House to make sure we extend those tax breaks.”

But despite the pass-through expansion being hailed by both Hovde and Johnson as a boon for small business, more than half of the total benefits went to taxpayers with annual incomes of $500,000 or more.

Personal Taxes and Conflict of Interest Potential

Hovde has likely seen his personal taxes cut by more than $76,000 per year, based on a 2023 reported income of $2.2 million—because his tax rate would have sunk from 39.6 percent to 37 percent. If the TCJA tax cuts were simply renewed next year, the top five percent of households (with annual incomes above $450,000) would receive 45 percent of the total tax benefits. Households like Hovde’s, with annual incomes over $1 million, would average a tax cut of about $70,000.

Hovde has refused to commit to divesting from Sunwest Bank if he were to be elected senator (though he has said he would resign from management), meaning he still stands to be greatly enriched by decisions he would make about everything from personal and corporate tax rates to deductions and regulations, even bank bailouts. His campaign has received thousands of dollars in donations from Sunwest employees—including the maximum allowable donation from Lappetito, his bank president, with whom he was photographed on Orange County’s Laguna Beach in June, when supporters were expecting him as a post-parade community event in Oconto County, Wisconsin.

“He is a walking conflict of interest who the people of Wisconsin cannot trust to work for them and only them,” said Arik Wolk, rapid response director for the state Democratic Party. 

Foreign Government Deposits

The Senate campaign is getting questions about money beyond Hovde’s—after the news outlet Heartland Signal reported Sunwest has received $118 million in deposits from undisclosed foreign banks since March 2017, when Hovde took over.

But when asked about the potential conflict of interest of a US senator being invested in a bank with foreign government deposits, Hovde told a conservative podcast host: “Who cares?” 

Hovde said it didn’t matter because they were deposits, not investments—though depositors can influence public confidence in a bank’s health.