Wednesday, February 13, 2013

Controlled Experiment on Taxation (New Title)

In an op ed in The Gazette, Pat Jury, the head of the Iowa Credit Union League, wrote that "[i]ncreasing taxes on credit unions increases taxes on Iowa Credit Union members. Credit unions would have to pass along the increased expense to their members in the form of higher fees, higher loan rates and lower savings dividends."

However, Jury's opinion is not shared by some within the credit union industry.

Ed Speed, the former CEO of Texas Dow Employees Credit Union (TDECU), wrote the following in an August 10, 2011 guest opinion appearing in Credit Union Times.

"The only impact taxation would have on TDECU is that we will double in size every seven years instead of every five years. So what?

The NCUA special assessments prove my point. Last year and for the next nine years, credit unions are paying special NCUA assessments, assessments that have just about the same impact as a 35% tax on credit union net income.

The assessments we paid - and will pay for the next decade - did not drive us to change loan and deposit rates and fees last year, nor will they in the future.

Paying a 35% tax on income would have the same impact on how we price: none, nada, zip."

So, the corporate assessment provides a controlled experiment to simulate the impact of taxation on the pricing of credit union services.

Did your credit union change loan or deposit rates and fees because of the corporate credit union assessment?


  1. Assessments were dealt with in various ways.
    Some of us are efficient and growing and we absorbed the assessments by doing nothing or cutting back on bonuses, marketing for a while.
    Many credit unions, like contra costa, funded assessments by "charging" their members thru lower than market share rates.
    What many of the larger credit unions have begun to understand, but won't publicly admit is that we can handle taxes, if we get the regulatory relief that Cuna (cu not accountable) can't get.
    That's why some large credit unions like TDECU left Cuna (cu not accountable).
    Seems the fear mongering about taxes is wearing thin.
    Now, if we could just get the congress to do its job with NCUA.

  2. Texas Dow has assets of well over a Billion dollars. Their former CEO's comments are reasonable for their large scale, but for 90% of cus, the arithmetic does not work. So, yes, Jury's opinion is not shared by some, but is shared by most. Most have to take away from the members to pay toward the assessments, as they go.

    Member tolerance for lost value will wear thin long before 2021. Perhaps the experiment for the 90% is discovering this tolerance limit and then seeing if that arithmetic can work for their smaller scale credit unions.

  3. Our credit union started losing money with the assessment and zero interest rates. They merged because the hand writing is on the wall for CU's that are 50mil or less.

  4. The "arithmetic" hasnt worked for years. There would be more mergers but for the absence of accountability. Regulators (and not ncua) will need to force the issue if they want to avoid complete deterioration of capital.



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