Banker's view: Credit unions should pay their fair shareThe opinion piece about federal tax reform and its impact on credit unions was very interesting (“Credit unions strengthen communities, benefit consumers,” Aug. 9). The writer, Mark D. Cummins, the president and CEO of the St. Paul-based Minnesota Credit Union Network, did a good job of introducing the Senate Finance Committee’s tax-reform plan.
By: Joe Witt, Duluth News Tribune
The opinion piece about federal tax reform and its impact on credit unions was very interesting (“Credit unions strengthen communities, benefit consumers,” Aug. 9). The writer, Mark D. Cummins, the president and CEO of the St. Paul-based Minnesota Credit Union Network, did a good job of introducing the Senate Finance Committee’s tax-reform plan.
However, Cummins didn’t explain one of the key parts of the plan. Once all business tax exemptions are removed, Congress would reduce the tax rates for all business taxpayers.
If an industry successfully convinces Congress to put its business tax exemption back into the tax code, Congress would increase the tax rates on all the taxpaying businesses to “pay for” that industry’s tax exemption. Therefore, Congress must determine whether a tax exemption is so important, from a public-policy standpoint, that all remaining taxpayers should pay higher taxes.
The credit union tax exemption is simply not justified.
Credit unions are so desperate to retain their tax exemption they make interesting arguments. Cummins suggested that eliminating the credit union tax exemption “represents the most serious threat to … our communities that we have ever faced.” I doubt the credit union tax exemption is more important to our communities than the tax exemption for charitable organizations like the Red Cross or your local food shelf.
Cummins argued that credit unions strengthen communities. That’s great, but it does not justify a 100 percent federal and state income tax exemption. Lots of businesses strengthen communities and pay income taxes. Those concepts are not mutually exclusive.
The credit unions also argue they should retain their tax exemption because they are member-owned cooperatives. That logic is also flawed. There are lots of member-owned cooperatives that strongly support their member-owners and pay income taxes under Subchapter T of the federal tax code. For example, mutual insurance companies and mutual savings banks provide solid benefits to their member-owners — and they pay income taxes to support federal and state government programs.
Congress does not give out tax exemptions based on a business’ structure or for vague notions like community support or other general niceness. Congress gave credit unions their tax exemption because they once fulfilled a specific, valid, public-policy mission: They once served people of modest means. Instead of listing facts and figures that prove how well they perform that mission, the credit unions make distracting arguments. Why? Because their record of fulfilling their tax-exempt mission is woefully poor. Instead of focusing on low- and moderate-income people, credit unions now serve wealthy people and corporations, which is completely inconsistent with the mission that justifies their tax exemption.
The credit-union industry now controls more than $1 trillion in assets. It is time to have a real policy debate about whether its tax exemption remains warranted. Let’s discuss whether giving tax-subsidized financial services to wealthy people and corporations makes sense. Let’s discuss why there are no controls or qualifications for this tax exemption. Let’s determine whether taxpayers want to pay higher income taxes so credit unions can retain their unjustified tax exemption.
Joe Witt is president and CEO of the Eden Prairie-based Minnesota Bankers Association (minnbankers.com). He wrote this for the News Tribune.