In a dramatic move aimed at leveling the playing field and thus possibly ending the decade-old war between banks and credit unions here, a legislative leader proposed a bill last week that would eliminate Utah's franchise taxes on banks.
Rep. Wayne Harper, chairman of the House Revenue and Taxation Committee, said he hopes the bill, if successful, will satisfy the bankers' long-sought efforts to achieve equal footing with the state's credit unions and end the bitter fighting between the two camps. Rep. Glenn Donnelson, a member of the committee, agreed. "We need to get rid of the banks/credit unions argument forever, and this will do it," he said. "It will level the playing field."
Scott Simpson, president of the Utah League of CUs, said he hopes the legislation, if successful, will quell the bankers' long-time enmity with CUs, and he testified in favor of the bill last week. "We have never opposed the bankers wanting to address their own tax status," said Simpson. "They've been squealing for six years about this; now it's time for them to do something positive about it."
But the bankers were reluctant to embrace the bill, which would save them an estimated $14 million in state taxes for 2006, and as much as $37 million in 2007. Howard Headlee, president of the Utah Bankers Association, said last week they are waiting to see what happens with a broader tax-relief bill endorsed by new Gov. Jon Huntsman which would eliminate all corporate income taxes in the state, including those assessed banks, over the next five years.
What's more, Headlee said the bankers were not ready just yet to give up their fight against credit unions, which would still have the advantage of the federal income tax exemption, he noted. That's why the bankers will continue to push for the legislative resolution asking Congress to, among other things, allow states to tax federally chartered credit unions, something the states are currently prohibited from doing. That resolution has passed the House and has been passed to the Senate for its deliberations.
"You're halfway there. It's a step in the right direction," said Headlee of the legislature's tax relief proposals. "But the inequity based on the exemption from federal income taxes still exists."
The House tax panel, cognizant of the broader tax relief bill, agreed last week to table the one targeted at the banks, until there is some resolution of the governor's proposal.
Headlee said they will wait to weigh in on the bill to exempt banks from state taxes. "The bill is more of a political statement than a policy statement, simply because the sponsor has not reached out to us in any way," he said. "Anyway, the dispute between bank-like credit unions and community banks will continue on the national level."
