The draft proposal of the co-chairs of the National Commission on Fiscal Responsibility and Reform recommended several options that would eliminate all or many tax expenditures. While not specifically mentioned in the draft proposal, one tax expenditure that may be repealed is the tax exemption for credit unions.
Tax expenditures are defined in the law as "revenue losses attributable to provisions of the federal tax laws which allow a specific exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of liability."
Responding to the co-chair's draft proposal, Bill Cheney, CEO and President of CUNA, wrote the Commission that if "faced with federal income tax liability, a number of credit unions may no longer feel compelled to operate a credit union and could close or convert to for-profit banks."
It is very clear from his statement that he believes that the credit union business model needs its tax exemption to survive or to provide a value proposition to consumers. In other words, CUNA believes the sky is falling.
I find this to be a very sad commentary and I believe there are a number of credit union CEOs that would disagree with his point of view.
Other businesses have lost their tax exemption and have not gone the way of the dodo bird and I suspect that credit unions will also adapt and compete if taxed.
One business that has gone the way of the dodo bird without the tax exemption is the savings and loan industry. Bankers did not allow the S&Ls to have the same powers as banks while paying the same taxes. If you think CUs would settle for half a loaf of powers while paying full taxes, you are mistaken.
ReplyDeleteWhat a hoot, Keith, you are still trying to bring up the subject of Federal Tax Exemption for Credit Unions. How much did the ABA pay you for being this clever ?
ReplyDeleteI agree that credit unions should be taxed. Try to find a credit union that still adheres to motto "people helping people." Credit unions are looking like and acting like banks. Take down the signs with names of credit unions, repace with a bank name, and everything looks and is the same.
ReplyDeletethere are plenty of cu managers and boards that believe in themselves enough to confidently say they can adapt and compete, if taxed. cuna continues to find itself on the wrong side of what many cu's believe as they are compromised by their narrow view of the cu world...preserving tax favored status versus real regulatory reform such as access to secondary capital. cuna cant deliver meaningful reg reform so theyre stuck with "dont tax me bro'".
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