A proposal to raise taxes on Iowa credit unions is sparking a debate, leading to a pair of guest columns in Saturday’s Gazette.
“Bankers … are attacking the credit union tax status, claiming that increasing taxes on credit unions would help solve America’s fiscal woes,” said Patrick S. Jury, CEO/President of Iowa Credit Union League, in a guest column published Saturday. “Bankers want to raise the taxes of Iowa’s credit union member owners.
“What makes bankers’ claims more outlandish is that they are using the national economic challenges as the reason to tax credit union members,” Jury continued. “After TARP and taxpayer bailout, the idea that the bankers would advocate for an increase of taxes on any Iowan is self-serving.
“Iowans deserve choice and competition in their financial services,” Jury concluded. “Credit unions offer a better option for individuals, families and small businesses to keep more of their hard-earned money. Increasing taxes on credit unions takes this option away from consumers, and will drive up the cost of financial services for all. Banks should stop the false rhetoric about credit unions and put consumers before profits.”
Steve Goodenow, chairman of the Iowa Bankers Association, has a different view. “As Congress and the president work toward a resolution of the country’s fiscal woes, there is another option to consider: eliminate the federal income tax exemption for large, complex credit unions,” Goodenow wrote in a column published Saturday.
“Credit unions are a significant financial player in many Iowa communities, yet contribute nothing in federal income tax,” he continues. “It is not fair that the typical family of four pays an estimated $10,000 a year in federal income taxes, while a multi-billion-dollar credit union pays nothing. Eliminating the tax exemption for the large credit unions would provide another viable revenue source, estimated at about $2 billion annually.
“The exemption for credit unions was granted in 1934 with the passage of the Federal Credit Union Act. Tax exemptions are typically justified with a civic or social service commitment,” he continues. “In the case of credit unions, their commitment was to serve people of modest means in return for the exemption.
“Since 1934, credit unions have grown well beyond that original mission — and have become a trillion-dollar industry. Many credit unions have more than $1 billion in assets — a size that exceeds more than 95 percent of taxpaying Iowa banks. In fact, of the five largest financial institutions in Iowa, two are credit unions with more than $1 billion in assets.”
Read the columns linked above for more background. What do you think? Is the federal tax break for credit unions justified?