Removing Barriers Blog

ABA Attack Ad Greets GAC Participants
Posted February 21, 2016 by CUNA Advocacy

Our friends in the banking sector have a welcome message for CUNA GAC participants.  They’re planning to take out this ad in Hill publications suggesting that if Congress is looking for tax revenue, credit unions are the place to find it.

There are so many things wrong with this ad that it is hard to know where to begin.

First, the bankers continue to willfully ignore why credit unions are exempt from federal income tax.  It’s based on structure and mission, not powers or restriction.  The Federal Credit Union Act and the credit union tax status exist in separate parts of the law.  The tax status is based on credit unions’ structure as not for profit cooperatives and their mission to promote thrift and provide access to credit for provident purposes.  If the banks want to convert to not-for-profit status and structure themselves as one-member-one-vote credit unions, they can get the tax status as well.  Americans would probably appreciate the banks dedicating themselves to promoting thrift and providing access to credit using the cooperative principles!

Second, the bankers ignore that Congress also conveys a tax preference on subchapter S banks.  It is pretty disingenuous for the banks to encourage Congress – and state legislatures – to change the credit union tax status when thousands of banks have very similar tax treatment.  Take a moment and check out this website. Look at the section about advantages / disadvantages of S corp status.  Do you see where they list the advantage to customers of S corps bank customers?  Me either, it’s all about the bank stockholders.  Credit unions return the tax status to their members in the form of lower rates on loans, lower fees, higher returns on deposits.  Credit union members benefit.  And frankly, so do bank customers because we know where there are credit unions in the market bank prices are generally more competitive than where there are not credit unions. 

Finally, have the banks completely forgotten about 2008?  Seriously.  Have they no regard or appreciation for the extraordinary measures that the government went through in order to keep the for-profit financial sector afloat during the financial crisis?  The outlay of taxpayer money that was used to bailout the banks is the equivalent of decades of the credit union tax status.  Now, they’ll say that they paid most of the money back but there is no disputing that the bank bailout during the financial crisis certainly kept some banks around that would not otherwise be there.  Who did that benefit?  The shareholders. 

Having said all that.  Let’s take a deep breath.  The bankers would like nothing more than for us to storm the hill and defend out tax status.  Don’t let this ad or the banker tactics distract you on Capitol Hill this week.  We have a strong agenda in Congress and before federal regulators.  We want to improve the operating environment for you to serve your members.  Let’s tell our story and not get drawn into the battle the bankers want us to fight.

Ryan Donovan, Chief Advocacy Officer