The National Commission on Fiscal Responsibility and Reform released this week its report, The Moment of Truth.
Among its recommendations for reforming the corporate tax code was the elimination of all corporate tax expenditures, including the credit union tax exemption. Both the Office of Management and Budget and the Joint Committee on Taxation identify the credit union tax exemption as a corporate tax expenditure.
The report stated that eliminating business tax expenditures would allow for the corporate tax rate to be lowered and would also help to reduce the deficit. Lower corporate tax rates will make American businesses more competitive and abolishing special subsidies will create an even playing field for all businesses instead of artificially picking winners and losers.
While the Commission's deficit reduction plan fell short of the 14 votes needed to present its recommendations to Congress for a vote, a bipartisan majority, 11 out of 18 members, voted for the plan.
I believe this Commission has provided a valuable service in advancing the discussion. But the path to fiscal sustainability won't be easy. The special interests, which include credit unions and their trade associations and federal regulator, will vigorously fight to preserve their favorable tax treatment.
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With all of your writings about the credit union tax exemption, where are the bankers willing to stand up and give back its right to corporate tax exemptions via the Subchapter S status? Good for goose and good for gander!
ReplyDeleteDear Anonymous:
ReplyDeleteBusinesses that are organized for tax purposes under Subchapter S of the tax code are taxed. These businesses are taxed like partnerships. The owners of Subchapter S businesses pay taxes on the earnings of the business, whether the earnings are distributed or not distributed. This is not equivalent to a tax exemption.
It is my understanding that the Subchapter S banks get the protections of a corporation without paying for the privilege. If they want such protection, then taxation is the price for it and should be full tax-paying corporations like Bank of America, JP Morgan Chase, Wells Fargo and the soon-to-be non-government owned Citibank.
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