Sunday, March 11, 2018

Tax Reform Has Eliminated the Case for CU Tax Subsidy

Scott Hodge, president of the nonpartisan Tax Foundation, wrote that with banks’ effective tax rates lowered by the recent tax bill, credit unions have even less of a case to remain untaxed.

“Credit unions were becoming anachronisms before the enactment of the [tax bill], but that status should be declared official now that the tax gap between banks and credit unions has effectively been closed,” Hodge wrote. “If they are going to act like banks and subsidize sports stadiums like banks, it is time that they paid taxes like banks.”

He also effectively rebutted credit union lobbyists’ arguments that taxing credit unions would cause losses of income tax revenue. “Such studies amount to one-sided accounting, ignoring the fiscal costs of the taxpayer subsidies to credit unions and the economic impact that their tax-advantaged competition has on taxpaying for-profit banks,” he wrote. “And, how is it that repealing the tax subsidy that is already costing the federal treasury some $36 billion over the next decade could ‘cost’ the federal government $38 billion? That makes no sense.”

Read the Real Clear market op-ed.

12 comments:

  1. Right.
    It makes no sense unless you’re nafcu or CUNA desperately trying to justify your existence.

    ReplyDelete
  2. We expect the exemption to be eliminated.
    When is the only question.

    ReplyDelete
  3. We have discussed this at board meetings. We will not recruit our members into this fight. Cuna and credit unions are wrong headed about this.
    Members have every right to wonder why we aren’t paying taxes, especially the larger ones.

    ReplyDelete
  4. So, what do you say?
    Let’s have “the discussion “.
    Are you FOR the retention of the federal tax exemption?
    If so, why?
    Why is it right?
    Is it still justified?
    Is it fair to the overall (not just you and banks).
    State your case.
    All readers, weigh in...anonymous or not.
    Let’s hear your argument for or against and why..

    ReplyDelete
  5. There should be an asset size where the exemption no longer applies. $100 million, $500 million or $1 billion..... just pick an amount, but find a way to let smaller credit unions have at least a small chance at survival and reduce the incentive to grow through merger just for the sake of growth.

    ReplyDelete
    Replies
    1. Good points.
      Who’s next?

      Delete
    2. Agree with 12:48pm. Suggest the way to use asset size for taxation could be to list all US credit unions, sort descending by asset size, and then tax those above a top-down 25% of national total assets cutoff line. The bottom 75% remain tax exempt. Every year on March 1st refresh this list and the 25% cutoff line using Dec 31 Call Report Asset amounts for individual cus. Taxation restarts (or stops) on June 1st for each cu above (or back below) the 25% line.

      Next?

      Delete
  6. blah, blah, blah. Virtually every industry in America has a for profit sector which is taxed and a not-for-profit sector which is not. It's the structure that matters and guides tax policy, not asset size. This is straight out of the ABA playbook to attempt to drive a wedge between large and small credit unions. Bad argument!

    ReplyDelete
    Replies
    1. “Virtually every industry...”
      Name them.

      Delete
  7. Pretty funny cu thinking. Virtually every industry has for and not for profit.
    Hmmm.
    Technology.
    Automobile manufacturing.
    Airlines.
    Grocery stores.
    Men’s clothing.
    Women’s handbags.
    Speaking of bags, cu thinking is a bag of hot air.
    Saying stupid stuff like that is easy though when nafcu sports it’s absurd consumer savings analysis.
    Credit unions that are larger than $500 M are nearly all the net income of the industry and over 70% of the sssets.
    The reason the previous commenter thinks it’s a good idea based on asset size is because ....it IS a good idea.
    Little CUs are still CUs.
    Anyone else?
    How’s bout you nusser?
    Lapine?
    Oops lapine probably trying to lay low these days.
    Our board doesn’t care if we are taxed, we want to do more business loans and mergers.

    ReplyDelete
  8. All credit unions should be reclassified by Fed Gov't as Mutual Savings banks (state or fed) and then taxed as such. As MSB's:
    Bad news:
    Taxed.
    Good news:
    Still a not-for-profit mission (no stock holders)
    Now every citizen sees BANK signage and knows they can just open an account, at least doubling growth opportunity outside brand-locked and land-locked credit union spaces - depressurizes FOM overlaps, less predatory lending/feeing for survival.
    Restores a service-missioned local banking base matched to diverse local economies, nationwide.
    No stock can be issued by a MSB without a substantial member for-vote.
    Consumers benefit from increased and real competition for banks.

    All under fed/state regulators for MSBs
    Make FDIC the deposit insurer for all.
    Make NCUA a 3rd trade group for MSBs only, leave ABA the bigs and ICBA the non-big stock owneds.

    there, all fixed.

    ReplyDelete
    Replies
    1. Good idea. We have believed this is the right idea for our CU for a long time.
      We have no worries that we can handle the tax and now that it’s 21%, let’s just do it.

      Delete