Tax reform: It’s everything or it’s nothing
In a January 12 letter to Congressional leaders the American Bankers association continued their push for credit union taxation and to limit credit unions to serving only members of modest means. Below is an excerpt from that letter and here is a link to the full document:
Enhancing Charter Diversity and Leveling the Playing Field
A diverse and safe banking sector must be flexible while also ensuring that all financial service providers compete on a level playing field. The ABA will pursue legislation that provides taxpaying saving institutions and Subchapter S banks with protection and charter flexibility, as well as opportunities for increased capital raising to support economic growth. In addition, ABA will pursue equal tax and regulatory treatment for credit unions that have gone beyond their core mission to serve people of modest means. Likewise, lawmakers should reexamine and eliminate the Farm Credit System’s tax-favored status and subject the system to much greater scrutiny to ensure its lending is focused on agriculture. Stronger oversight of the fast growing credit union industry and Farm Credit System is long overdue, and we urge bipartisan support for a congressional review of these entities.
It might be the case that banks would be willing to accept a marginal tax on credit unions to get the ball rolling or maybe I could say with confidence that no legislation in the 114th Congress will threaten that tax status of credit unions. How much are you willing to bet, no matter what the odds are? The fact is that for credit unions taxation either is or it is not. For many tax provisions being considered for reform there is a margin of negotiation surrounding impact or level of a tax/credit. Since my time in Congress I have been involved in the development of tax law in a variety of capacities and in a variety of industries and I know that compromise is necessary to get things done. The issue for credit unions is that there is not much to negotiate when it comes to our tax status. We are either exempt or we are not.
As the ABA letter illuminates credit union taxation continues to be a top priority for bank trade groups and advocates throughout Washington. The danger is that, even if there is a slim chance that they will be successful, the credit union response should be as if that odds are that their efforts will prevail. This is due to the fact that there is no degree of taxation that is acceptable. Even if there was opportunity for negotiation about a credit union tax (which I feel would be limited, if only by the legislative process) the fact remains that once the door is open at all a wider breach is very likely to follow. So for us we battle like it is everything to ensure it amounts to nothing.
Of course CUNA, the Leagues and NAFCU and the phenomenal teams of advocates they support are working tirelessly to ensure that the tax status of credit unions continues to be recognized. There is plenty that each of us can do and the message, as is often the case with our wonderful movement, gets spoken loudest through our actions. The testimony of credit union members and their experiences with our attentive service rings true on Capitol Hill. When you are reaching out to your representatives make a point to highlight the member experiences and core principles in action that are the fuel that keeps our movement running strong. Certainly pushing back on the concept that credit unions should only be limited to serving those of modest means should be a top talking point. Finally, driving home the point at every opportunity that the credit union tax status is central to the role we play in the financial services industry. Credit unions provide the most significant counterpoint to banks and our member service sets the gold standard.
