Credit Union's View: Credit unions strengthen communities, benefit consumersThere’s been a lot of chatter lately about the Farm Bill and immigration reform, but there is another topic that hasn’t received as much attention and could affect the lives of every American.
By: Mark D. Cummins, Duluth News Tribune
There’s been a lot of chatter lately about the Farm Bill and immigration reform, but there is another topic that hasn’t received as much attention and could affect the lives of every American.
That subject is federal tax reform.
Congress is looking at a complete rewrite of the federal tax code. The U.S. Senate Finance Committee is taking a blank-piece-of-paper approach, whereby all current tax exemptions are removed, examined, and added back only if they meet certain criteria. In late June, Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch sent a letter to their Senate colleagues, including Minnesota Sens. Al Franken and Amy Klobuchar, requesting recommendations about exemptions to include.
One exemption under the microscope is the credit union corporate income tax exemption. Eliminating this exemption represents the most serious threat to credit unions — and our communities — that we’ve ever faced.
One reason we need to ensure that the credit union exemption is included in federal tax reform is that credit unions support and strengthen communities.
Minnesota credit unions are growing; and as local financial institutions, they make their communities their No. 1 priority — above making a profit. Any benefits credit unions receive from their tax-exempt status are passed on to their members and their communities. Credit unions also strengthen their communities by paying millions of dollars in property, sales and payroll taxes each year.
According to a recent Discover U.S. Spending Monitor study, credit union members are more confident in the economy and their personal finances than non-credit union customers. Also, credit union members are more likely than non-credit union members to expect money left over after paying their monthly bills. What this means is that credit unions help build consumer confidence, leading to stronger communities.
Additionally, credit unions provide benefits and financial balance. As not-for-profit cooperatives, credit unions help ensure a competitive marketplace because they provide an alternative to for-profit banks. Since their focus is on service, credit unions are able to grant loans in smaller amounts and allow low-balance accounts when other financial institutions may not be willing to do this because it wouldn’t be cost-effective.
Also, by passing earnings on, credit unions maximize their member/owners’ financial gain by offering lower interest rate loans, reduced fees and customized products. Eliminating the credit union corporate income tax exemption would result in a tax increase on
1.5 million Minnesota members and ultimately could lead to less consumer choice.
A third reason is that credit unions put money back into Minnesotans’ pockets. All savings from the credit union corporate income tax exemption are passed on to members, who are owners of their credit unions. For every $1 of credit unions’ corporate income tax exemption $10 is put back into the pockets of members and communities. The substantial savings Minnesota credit unions provide to consumers far outweigh any revenue that would be raised by taxing credit unions.
Those are just a few reasons Congress should protect and uphold credit unions’ corporate income tax exemption. Our communities — and a stronger financial future — are at stake.
Mark D. Cummins is president and CEO of the St. Paul-based Minnesota Credit Union Network. He wrote this for the News Tribune.